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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: Massachusetts. Title: Recommendations and proposed legislation as Place: [Boston] Date: [1918] t^u-'giiqq-s COLUMBIA UNIVERSITY LIBRARIES PRESERVATION BIBLIOGRAPHIC MICROFORM TARGET MASTER NEGATIVE # ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD BBS? 540 M38 new -»:•• mp RESTRICTIONS ON USE: Massacliusettn . Street railvmy investigation coEimission, • .. Recomenclations and proponed legislation as contained in the report of the Street rail- v:ay investigation commisGion on the problems relating to the street railways of the comnon- wealth. [Boston, IQlS'j cover-title, 97 p, 23 cm. At head of title: Senate, no. 265. The common- wealth of llassachuse/^^tts. TECHNICAL MICROFORM DATA « i FILM SIZE: 35vY^m TRACKING # : REDUCTION RATIO: l^X IMAGE PLACEMENT: lA (UA) IB IIB DATE FILMED: 11-1-°^ INITIALS : %) m^H Q3ue^ FILMED BY PRESERVATION RESOURCES. BETHLEHEM, PA. .'v'' J^/ ■9:' m 'V? %.^^ (Jl 3 3 O > i ^ N CO cob:: CJl ^-< cx)isi WD O 3 3 > o m (DO ^ o o X < N M o- ^^: *A ^*^ > A^ A- '*^. m ■V; ^^jy^ C? e^ ^: lO o o 3 3 o 3 3 S?/ > Ul .^i a^ S 3 3 O do c^ 00 g to ro 1.0 mm 1.5 mm 2.0 mm ABCOEFGMIJKLMNOPQRSTUVWXYZ abcde*ghi|fclmnopgrstuvw»y7 1 234567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyzl234 567890 ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 2.5 mm ABCDEFGHIJKLMNOPQRSTUVWXYZ abcdefghijklmnopqrstuvwxyz 1234567890 V ^' ^C. : m o ■o m -o o ^ • > C CO I TJ ^ 0(/) ; m o m «•**. ^^^ -c. c^ '4' '' 5g:< r*— « NJt— o»x OJ^ ODIN* o a»x aD^sl vO o ^^. mtl)f€ttp0f39mif0rk \(\3S LIBRARY School of Business iiiHI SB^SSSSSjBr'^^'*^^ It / '/ MAR ?- 1925 ljtk>A>4 . SENATE No. 265 ®l)e atotnmonweoUl) of ittaasacljuactta RECOMMENDATIONS AND PROPOSED LEGISLATION AS CONTAINED IN THE REPORT OF THE STEEET RAILWAY INVESTIGATION COMMISSION ON THE PROBLEMS RELATING TO THE Street Eailwats of the Oommonweaith. ^ I \A5\nCSS ID 5^0 \ in THE STEEET RAILWAY INVESTIGATION COMMISSION. From the Senate. JOSEPH W. MARTIN, Jr., Chairman, CHARLES W. ELDRIDGE. JAMES L. HARROP. From the House, JOHN M. GIBBS. GEORGE M. WORRALL. GEORGE BUNTING. MARTIN HAYS. JOHN L. DONOVAN. MICHAEL J. FITZGERALD. From the Governor, W. CAMERON FORBES. GURDON W. GORDON. EDWARD J. DUNN, Clerk. June 18 to Nov. 30, 1917. JOHN B. BABCOCK, 3d, Clerk, Dec. 1, 1917, to Feb. 1, 1918. I I ) CONTENTS. PAOB Legislation, ••.....,.., 7 Report of Commission, ••......,. 9 Present Condition of Massachusetts Street Railways, .... 13 Causes Leading up to the Present Situation, ig 1. Depreciation in the Purchasing Power of the Nickel, ... 19 2. The Growth of the Automobile Business, ..... 22 Privately Owned Autos, ........ 22 Jitneys, . . ' 23 3. Taxation and Highway Maintenance Requirements, ... 24 Property Tax 24 Corporate Franchise Tax, 25 Commutation or Excise Tax, ....... 36 Compensation Tax (Boston Elevated), ..... 27 Requirements relative to Maintenance and Repair of Highways, . 28 4. Improvements in Service, ........ 35 6. Non-paying Lines, ......... 37 6. Failure to Provide for Depreciation and Obsolescence, ... 38 7. Lack of Co-operation between the Street Railways and the Public, . 43 Conclusions, •••......,. 46 Recommendations, ••••....., 46 1. Jitneys [46 2. Autos operated by Street Railways, 47 3. Trolley Freight, ! ! 47 4. Taxation and Highway Maintenance, ...... 47 6. Alteration of Tracks for Improved Equipment, . . . .47 6. Alteration of Location in Highways, ...... 48 7. Alteration or Construction of Bridges, ...... 48 8. Service-at-cost Plan, 4g Acknowledgments, .......... 52 Dissenting Statements, .......... 54 Dissenting Reports, 5(1 Appendices : — Appendix A. — Proposed Legislation 95 1. An Act relative to the Powers and Duties of the Public Service Com- mission, 65 2. An Act permitting Street Railway Companies to use Motor Vehicles, 65 3. An Act relating to Street Railway Companies as Common Carriers, . 66 4. An Art relative to the Taxation of Street Railway Companies and the Repair and Maintenance of Public Ways and Places in which Street Railways are located, ....... 66 5. An Act relative to the Alteration of Location of Tracks to provide for Improved Equipment, ........ 70 6. An Act relative to the Alteration of Location of Street Railway Tracks in Highways, ........ 72 7. An Act relative to the Alteration or Construction of Bridges upon which Street Railway Tracks are located or are to be located, . 73 8 a, b, c, d. Service-at-cost Plans submitted to this Commission, . . 74 ©he Commoniocaltl) of £t\as5ac\)ii5tns. LEGISLATION. Chapter 129 or the Resolves of 1917, Resolve to provide for an Investigation by a Special Commission OF Problems relating to the Street Railways of the Common- wealth. Resolved, That a special commission, to consist of three members of the senate, to be appointed by the president, six members of the house of representatives, to be appointed by the speaker, and two persons, not members of the general court, to be appointed by the governor with the advice and consent of the council, shall sit during the recess of the general court to investigate and study the various problems relating to the control, supervision, regulation, ownership, operation, taxation, capitalization, finance, management and development of street railways in this common- wealth, and to the powers, duties and liabilities of street railway com- panies. The commission shall be known as the street railway investigation commission and shall especially consider the following matters: the de- velopment of street railways in such manner as to provide for the cheaper and quicker conveyance of food, mcluding milk, from the country to the city, and of freight to and from the various railroad stations and wharves; the construction of street railways in parts of the state not now served by street railways or other means of transportation; the use of motor vehicles by street railway companies as feeders, or otherwise; the granting of au- thority to cities and towns to invest in the securities of street railway com- panies, or otherwise to render financial assistance to such companies; the ownership or operation of street railways by the commonwealth, or by cities and towns; amendments of the law relative to the obUgations of street railway companies in respect to the paving of streets and the maintenance and repair of ways and bridges in or on which street railways are operated; the sale of commutation tickets for transportation by street railways; and the taxation of street railway companies. The commission hereby provided for shall be furnished with a room in the state house, and shall have the services of a clerk. The commission shall give such pubUc hearings, and in such places, as it may deem expedient, may administer oaths, may require the attendance of witnesses and the production of books and docu- ments, may be allowed such sums for expenses necessarily incurred and shall receive such compensation as shall be approved by the governor and council. The conmiission shall report to the next general court, not later than the second Wednesday in January, with drafts of such legislation as it may deem expedient. [Approved May 25, 1917. i Ml 1 It EEPOET OF THB STREET RAILWAY INVESTIGATION COMMISSION ON THE STREET RAILWAYS OF THE COMMONWEALTH. The Street Railway Investigation Commission, appointed under chapter 129 of the Resolves of the year 1917, has the honor to submit herewith its report. The purpose for which this Commission was created may be outlined as follows: — To investigate and study the various problems relating to the control, supervision, regulation, ownership, operation, taxation, capitalization, finance, management and development of street railways in this Common- wealth, and to the powers, duties and liabilities of street railway companies. The Commission shall be known as the Street Railway Investigation Com- mission, and shall especially consider the following matters: the develop- ment of street railways in such manner as to provide for the cheaper and quicker conveyance of food, including milk, from the country to the city, and of freight to and from the various railroad stations and wharves; the construction of street railways in parts of the State not now served by street railways or other means of transportation; the use of motor ve- hicles by street railway companies as feeders, or otherwise; the granting of authority to cities and towns to invest in the securities of street railway companies, or otherwise to render financial assistance to such companies; the ownership or operation of street railways by the Commonwealth, or by cities and towns; amendments of the law relative to the obligations of street railway companies in respect to the paving ci streets and the maintenance and repair of ways and bridges in or on which street railways are operated; the sale of commutation tickets for transportation by street railways; and the taxation of street railway companies. In pursuance of the resolve, on May 25, 1917, the President of the Senate named as members of the Commission from the Senate Hon. Joseph W. Martin, Jr., of North Attleborough, Hon. Charles W. Eldridge of Somerville, and Hon. James L. Harrop of Worcester; and the Speaker of the House of Repre- )f 10 REPORT ON STREET RAILWAYS. [Feb. sentatives on the same date named as members of the Com- mission from the House Representatives John M. Gibbs of Watham George M. Worrall of Attleboro, George Bunting of iTl^'l'"' ^'''' ^^ ^^^'^"' '^^^'^ L. Donovan of Boston and Michael J. Fitzgerald of Northampton. On June 13 His Excellency the Governor of Massachusetts appointed Messrs. W. Cameron Forbes of Norwood and Gurdon W. Gordon of bprmgfield members of the Commission. The Commission organized on June 18, 1917; Senator Joseph W. Martin Jr., of North Attleborough was elected chairman; ii^dward J. Dunn of Boston was elected clerk. The Commission at its first meeting decided on a program of public hearings. Since the entire street railway situation in the btate was to be considered, it was thought best to hold hearings m several of the principal cities of the Commonwealth. The first seven public hearings were held at Boston between July 10 and Sept. 19, 1917. On September 26 a public hearing was held m City Hall, Fall River; on September 27 at City Hall Lawrence; on October 2 at City Hall, Pittsfield; on October 3 at the Administration Building, Springfield; and on October 4 at City Hall, Worcester. Following those held in the above cities eight more hearings were held in Boston, the last one being on Dec. 6, 1917 Thus twenty public hearings were held by this Commission, extending over a period of neariy six months; fifteen of these hearings Stlte '"^ "^ ''''^ ^^' '° ''^^"" "^^^"^ throughout the Letters were sent to the various mayors and boards of select- men boards of trade, granges and local organizations of the Amalgamated Association of Street and Electric Railway Em- ployees of America. The Commission urged these organizations to study carefully the resolve under which the Commission was working, and mvited the coK)peration of such organizations. The Commission suggested that the problem be studied in all Its aspects, so that the representatives of these organizations might appear before the Commission with such recommenda- tions as they deemed expedient. In addition to the letters of the Commission, hearing notices were sent to the proper representatives of the above organiza- 1918.] SENATE — No. 265. 11 tions, keeping them posted as to the date and places at which the hearings were to be held. The presidents of the Massachusetts street railways received a letter from the Commission stating that the Commission ex- pected them to submit their views as to the solution of the street railway problems which confronted the Commonwealth. More than 150 persons addressed the Commission at the pub- lic hearings. Nearly all of the street railways in Massachusetts were represented by their presidents or other ofiicial representa- tives. Many of the cities and towns throughout the State sent officials to represent them at these hearings and to present their views to the Commission. Some of the speakers representing the municipalities requested permission to address the Commis- sion after the street railways had stated their case, and were allowed to do so. In addition to the street railways and the municipalities the Commission was addressed by persons repre- senting certain of the boards of trade, granges and labor organi- zations in the State. Bankers, trustees and others appeared be- fore the Commission, representing the viewpoint of the investors in street railway securities. Other persons individually brought to the attention of the Commission matters which they con- sidered would aid in the solution of the problem confronting the street railways. In addition to holding the public hearings the Commission in- vited the representatives of cities and towns, organizations and street railways to send written communications explaining their views on the matters under consideration. • It seemed wise to the Commission to look at the street rail- way problem from as broad a viewpoint as possible, and for this reason an endeavor has been made to collect considerable information concerning street railway conditions in the United States and Canada, and to some extent in South America and in European countries. Appendix G contains information rela- tive to street railway conditions in foreign countries. A questionnaire was sent to the public service or other com- mission concerned with railway regulation in every State, and in each Province in Canada. This questionnaire sought in- formation pertaining to franchises, taxation, trolley freight, pub- lic ownership, rate regulation, capitalization and similar matters. f 12 REPORT ON STREET RAILWAYS. [Feb. The information received in answer to these questions will be found .n Appendix F of this report, which deals with stre^ Lu way cond,t.o„s throughout the United States and CanaT A similar series of questions was sent to 1,000 cities' and towns in the United States requesting information of he same general cha«»cter. This list included all of the larger cftilsb the United States, together with many of the smallef cittlnd towns picked at random. In Appendix F there will Tl^ tt UniSl! '"'TK"'r r"™"« ''^ '' largest citllsn the United States. The data from aU the cities and towns from ner that the answer to a particular question from any city ^r town may readily be noted. ^ ^ ' anr^Lf s!"'"™?"" ""* •" ''^ "^^ ^"""^"^ '^^^ '"•d town, and Public Service Commissions was found to be of much value he Commission also desired to visit certain of the cities in the fonnation by a discussion of the conditions in those cities w^i the representatives of the city and the railway officials Z -rdingly. with the consent of the Governor and CoTn U. ^ Commission inspected the street railway systems of New York Deilt^H- '''''"'''"'• ^*'''^''"^' ^''•<=»^' MUwauk land Detroit m this country, and Toronto and Montreal in Canada A brief account of the inspections made in these c7ti^ .s t eluded m Appendix B of this report. Letters were sent to the cities and towns in both the United States and Canada owning or operating their own street S ways_ Information contained in the answers to these letters together with much information coUected from other sotS' has been compded under "Municipal Ownership" in App"n2 E of this report. Owing to the present conditions in eZ^I rectly from the various foreign cities relative to the street rail- way conditions The information compiled, therefore, re a^^ to foreign conditions has been obtained from the virions «! artrsl W°« ^•'-f r ''^ ''^--"tion has been obtains! at the State and Boston Public Libraries, the library of the Pub- he Service Commission, the Boston Elevated library and ^e tZZtZ^''-^^- ^-^^-^ «^ ^-'-^^ -^ of 1918.] SENATE — No. 265. 13 One of the problems which this Commission was asked to study was the development of street railways in such manner as to provide for the cheaper and quicker conveyance of food, in- cluding milk, from the country to the city, and of freight to and from the various railroad stations and wharves. A considerable amount of information was, therefore, collected showing the present conditions in this State relative to trolley freight. In this connection particular attention was paid to the co-ordina- tion of lines with respect to street railway interchange points, and connections between street railways and steam railroad lines. This information has been compiled mainly from replies of street railways to a questionnaire sent out by the Commis- sion bearing on this subject. A letter was also sent to certain of the dairy farmers in Massachusetts requesting information as to conditions pertaining to the transportation of milk by the street railway companies. A detailed account of the trolley, express, milk and freight service maintained in Massachusetts will be found in Appendix D. Appendix C of this report contains a compilation of statistics relative to Massachusetts street railways. These statistics give much data concerning the growth, operating results, capitaliza- tion, taxes, etc., with comparative figures in some cases for railways outside of Massachusetts. Present Condition op Massachusetts Street Railways. The situation facing the street railways in Massachusetts at the present time is critical and most unsatisfactory both to the street railways and to the public. The public is not receiving the service to which it is entitled, and the investors in street railway securities are not receiving a return commensurate with the investments which they have made. The financial diffi- culties in which the street railways find themselves may be at- tributed to several factors. Some of these are directly traceable to the war, but there are still other and probably greater fac- tors, not likely to be temporary in their nature, requiring con- sideration and probably remedial legislation. The result of the hearings and other investigations carried on by this Commission has brought forth the fact that the invest- ing public has largely lost confidence in street railway securities. 14 REPORT ON STREET RAILWAYS. [Feb. I 1918.] SENATE — No. 265. 15 It IS evident that the street raiWays of Massachusetts are not prosperous, except perhaps in a few isolated cases. The follow- ing comparative figures of the financial statistics of the Massa- chusetts street railways as a whole will illustrate this SsfL^S^'^TK '"'^'"^•^"°« 30. 1911, the gross earnings were »^5,000 000, the operating expenses $23,000,000, the net eam- and the dividends declared amounted to 14,750,000. an averag^ ratio of dividends to capital stock of 5J per cent. For the year ending June 30, 1916. the gross earnings had increased to nearly $41,500,000, an increase of 18| per It. sinc^ Til The operating expenses had reached $29,000,000. representing an increase of 26 per cent. The net earnings remained the same um'^j.''''^''^ '''' ''''■ "^^ '^'^^'^ decia^d ;:^ 1911 of $750,000. The average ratio of dividends to capital t .T.oT "" ''''''''' ^'°- ' P- -"*• In this same $192,000,000 to more than $226,000,000, an increase of over 18 ^fi ^n n« J ^"^^^ '^"^^ •""'^'''"^ •l'"in« tWs period from $86,500,000 to $102,500,000, an increase of 18 per cent. Z noted above the dividends in 1916 were, however, actually less by nearly $750,000 than those declared in 1911. showing a drop in the average ratio of dividends to capital stock from 5} to 4 per cent. Further illustrations could be given, but it sLs $750,000 m dividends declared during a six-year period when the capital stock had increased by $16,000,000 proves the case During the calendar year of 1917 the Boston Elevated had a gross revenue of $19,700,000, an increase of $400,000 over the preceding year The operating expenses, however, increased at a aster rate than the gross earnings, the result being that the 1917 net earnings were less than those of 1916. As a result the stock of $23,789,400. whereas in 1916 the road earned about 4.9 per cent, on its capital stock. reZt^ Tr'' '" ^^^ '*'""* ""^^'"y «^^""ties have become K t.'' TT7 u t'"^ ^' '^' '^"^'' P"<* °f the «tock. In 1911 the stock of the Boston Elevated Railway ranged from 103^ to 124|, and in the summer of 1917 it stood at 61. West End preferred, having a par value of $50 a share, and a guar- anteed dividend, ranged from 100 to 105 in 1911, and was quoted at 63 in July, 1917. Springfield Railway Company pre- ferred, which was quoted at 93 to 96 in 1911, was quoted at 54J on April 25, 1917. During the past six months the stocks have receded still further, the Boston Elevated touching the low point of 27 in December, and the West End preferred going as low as 45 in the same month. The Commission has stated earlier in this report that prevailing war conditions have had their effect on the present outlook of the street railways, and it is true that the extremely low quotations mentioned for Decem- ber, 1917, are partly due to war conditions. These war-time prices do not fairly represent the value of the properties con- cerned. The marked depreciation in the securities extending over the six-year period from 1911 to 1917 is, however, signifi- cant, and proves that these street railway securities are now in disfavor. Consequently the street railways are in no position to raise additional capital, no matter how urgently needed. Under Massachusetts laws capital stock cannot be issued for less than the par value paid in in cash. As the stock of most of the roads is selling for less than par, no further money can be raised by the sale of stock. Under Massachusetts laws, again, the total amount of bonds which may be issued can in no case exceed the amount of capi- tal stock and premiums paid in. A study of the balance sheets of the various companies will show that substantially all of them have issued their maximum. It is unsound financially, and also almost impossible as a matter of practice, to borrow on short-time notes or at the banks. Thus the street railways are unable to undertake improve- ments, extensions and the purchase of modern equipment. The public demands additional facilities, modern and up-to-date equipment, and the increase in our population requires a pro- portionate growth in the mileage and equipment of our street railways. The street railways in Massachusetts have increased their gross investment from $95,000,000 in 1900 to $145,000,000 in 1905, to $192,000,000 in 1911, and finally to nearly $227,000,- 000 in 1916. The problem is not merely a question of placing r:rraa. 16 REPORT OX STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 17 the roads in such a position that they can meet current ex- penses; they must also be in such financial condition that they can add to their investment a sum of from $7,000,000 to $10,000,000 annually. Only by this increase in money invested can the companies hope to meet the ever-growing demands for increased, quicker and more comfortable transportation facili- ties. Money for these purposes can be derived from two sources, — viz., by additional capital or from net earnings. In the latter case these improvements will be made from net earn- ings only when a surplus remains after the payment of reason- able dividends. Were the security owners to be deprived of all return on their capital in order to provide for extensions the result would be to place the street railway securities in such a position that no new issues could be floated. The transportation lines in the vicinity of Boston form a large proportion of the Massachusetts street railways, as is sho^m by the fact that the gross earnings of the Boston Elevated, includ- ing its leased lines, for the year ending June 30, 1916, was $18,687,000 out of a total for the State of $41,479,000. In the calendar year of 1917 the gross earnings of the Boston Elevated amounted to nearly $20,000,000. Thus the gross revenue of the Boston Elevated lines represents 45 per cent, of the gross rev- enue of the entire 38 street railways operating throughout the State. Boston formerly occupied a unique but fortunate posi- tion as compared with other cities in the United States. The statement has been made, and this Commission believes cor- rectly, that Boston is the only large city in the country which has kept its transportation facilities abreast of the increase in population. It should be remembered that Boston became a pioneer in the field of rapid transit service when it opened the Tremont Street subway. If at times it has seemed that Bos- ton's rapid transit facilities have not been laid out with the greatest efficiency, or the lines co-ordinated sufficiently, the fact should be borne in mind, first, that the geographical situa- tion here constitutes an extremely difficult problem, and second, that this city has led, while others have merely followed, and thus mistakes incident to this pioneer work of rapid transit development were undoubtedly made. If, therefore, Massachusetts still desires continuing increased and better service, the street railways must be placed in a posi- tion where they can be reasonably expected to meet the urgent demands of the present and the future generation. One of the fundamental difficulties which confronts the whole street railway situation is the fact that neither the street rail- ways nor the public have recognized the fact that the street railway business is a partnership in which the entire community is interested. The interest of the public is derived from three principal sources. The first, and the one which reaches the largest public, is as the user of the street railway. In 1916 al- most 800,000,000 passengers were carried on the street railways of Massachusetts, which was equivalent to more than 200 yearly rides per inhabitant. This transportation convenience is so universal that it reaches to the heart of our entire social and economic system, and is so important that it can be put down as axiomatic that the street railway service must be maintained, must be extended and must continue to improve. The second aspect of this public partnership is through the ownership of street railway securities. Thousands of residents of this Commonwealth own stocks and bonds of the street rail- ways. Millions of these securities are purchased by savings banks, insurance companies and other institutions, and the value of these securities thus has a direct bearing on the property of every depositor in savings banks and on the holders of insur- ance policies. The third aspect is that of the owners of property along the lines served by the railway. It is a well-known fact that real estate served by adequate street railway facilities is much more readily salable, and commands a higher price, than real estate not so served. The interest of the property holders is so patent that if an effort is made to tear up a street railway and sell it as junk, the owners of property along the line are apt to band to- gether to save the railway, and the towns interested generally take vigorous action to keep the railway in operation. An in- stance of this is the case of the Swansea & Seekonk Street Rail- way. The Providence & Fall River Street Railway, after an unsuccessful career, was finally sold at auction. Local persons, however, were so interested in the continuance of this line as an operating property that they repurchased the property of ••■Il t 18 REPORT ON STREET RAILWAYS. [Feb. this railway, and, securing new charter rights, have placed the line in operation within the last month or two. The Taunton & Pawtucket, which had been operated by a receiver, was sold a short time ago. At the present time vigor- ous efforts are being made in the locality formerly served by this line to save this property from being sold as junk, so that it may be put in operation again. The patrons have voluntarily paid higher fares than those scheduled, and it looks as though this road would be purchased back from the company which had intended to junk it, and would be kept in operation after all. Recently certain other small roads, such as the Norwood, Canton & Sharon, the Ware & Brooldield, and the Nahant & Lynn have threatened to cease operations entirely, owing to the apparently hopeless problems before them. The Bay State, the largest system, so far as mileage is concerned, in this State, and one of the largest systems in the United States, has just been placed in the hands of a receiver. The street railway problem is, therefore, not an academic one, but is eminently practical. Does the Commonwealth wish to have its street railways maintain, extend and improve their service? If so, there must be a broadened understanding by all concerned, and the principle that the public and the street rail- ways should of necessity be partners for the common weal must be kept in mind. This Commission believes that only through such a leavening of thought can equitable legislation be pro- vided which will bring the street railways up to the standards desired. Causes leading up to the Present Situation. As a result of its investigation this Commission believes that the following causes have contributed to the present unsatis- factory situation relative to the street railways in this Common- wealth. No attempt has been made to give these causes in the order of their importance, since the individual railways are affected in varying degrees by the different causes. 1. Depreciation in the Purchasing Power of the Nickel. 2. Growth of the Automobile Business. 3. Taxation and Highway Maintenance Requirements. 1918.] SENATE — No. 265. 19 4. Improvement of Facilities. 5. Non-paying Lines. 6. Failure to provide for Depreciation and Obsolescence. 7. Lack of Co-operation between the Street Railways and the Public. 1. Depreciation in the Purchasing Power of the Nickel, During the past twenty years the cost of labor and material has risen considerably. The "platform expense," that is, the wages paid to motormen and conductors, has risen greatly in this period. During the ten years from 1897 to 1907 the hourly rates increased by about 25 per cent.; in the next period, from 1907 to 1917, the increase was from 30 to 50 per cent., giving a total percentage increase for the twenty-year period from 1897 to 1917 of from 60 to 80 per cent. During the ten years between 1897 and 1907 the cost of coal increased 10 to 20 per cent., and from 1907 to 1917 it has in- creased in many cases by as much as 100 per cent. The 1917 figures for the cost of coal should be taken with caution, since they are due to war conditions, and it is uncertain to what ex- tent the price will recede when normal conditions are again reached. The cost of rails increased from 1897 to 1907 by from 30 to 50 per cent., and from 1907 to 1917 by from 50 to 100 per cent, in many cases. Again, the war prices for steel do not represent permanent conditions. Other material used in con- nection with tracks, equipment, power plants, etc., has in- creased correspondingly. Twenty years ago the street railway outlook appeared prom- ising, and promoters were anxious to build electric railways in all directions. At that time there appeared little likelihood of a fare higher than 5 cents ever becoming necessary. For this reason, in 1897 the Boston Elevated was granted its charter by the State, providing that it should not charge for a period of twenty-five years from that date a fare in excess of 5 cents. In the case of most of the other street railways the fare was not limited by charter, and the companies could in a general way increase fares at their own volition until 1913. Since that time the Public Service Commission has had control over street railway fares. In the hearings before this Commission the representatives of the street railways stated that they believed that the present |::i] 20 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. method of rate regulation by the Public Service Commission was not satisfactory. Under the Railroad Commission the rail- ways were allowed to establish their own rates, subject, to some extent, to the regulation of the Railroad Commission. From 1871 to 1898 the commission could, upon petition, revise and regulate fares established by the company, with the limitation, however, that the fares should not, without the consent of the company, "be so reduced as to yield ... an income of less than 10 per cent, upon the actual cost of the construction of its roads and the purchase of property for its necessary use, to be determined by the said Board.'* In 1898 this limitation was changed so that fares should not be reduced below the average rate of fare charged for service by other street railway com- panies, which in the judgment of the Commission are operated under substantially the same conditions. In 1901 the statutes were changed to such an extent that the Railroad Commissioners could merely recommend changes, but could not compel them. In 1913, however, the powers of the Railroad Commission were transferred to a new body, — the Public Service Commis- sion. This commission may, either upon complaint or upon its own motion, hold public hearings and make an investigation as to the propriety of any change of rates. Pending such an in- vestigation and decision the commission is given power to sus- pend the taking effect of such changes, but not for a longer period than ten months beyond the time when such changes would otherwise take effect. The burden of proof to show that such increase is necessary in order to obtain a reasonable compensation for the serv^ice rendered is placed upon the car- rier. Since 1913 there have been approximately twenty street railway rate cases before the Public Service Commission. A decision has been rendered on these cases in times varying from forty-seven to three hundred and seventy-nine days, the aver- age being somewhat over four months. The street railways have stated before this Commission that they desire legislation which will give to them the power to fix their own rates, and to the Public Service Commission author- ity to revise and regulate the charges so established by a street railway company, with a provision that these fares should not be reduced below a point enabling the company to earn upon the actual amount of investment in its property such a rate of return, to be designated in the statute, as will enable the com- pany to sell additional capital stock from time to time at par. While discussing fare changes it may be interesting to note that Massachusetts is the home of the 6-cent fare. On April 13, 1905, the Warren, Brookfield & Spencer raised its fare to 6 cents, being the first company in the country to adopt this unit. In the period since 1913 the Public Service Commission has permitted about one-half of the operating companies in the State to make an increase in fares. In certain of these cases the companies were given precisely what they originally sought, or else voluntarily accepted, while in other cases partial in- creases were allowed. Several street railways in the State have 7-cent units, and certain ones 8-cent units. At the present time, out of a total of 2,198 miles of trolley line in the State, excluding the Boston Elevated system, the unit, of cash fare is 5 cents on 904 miles, 6 cents on 1,110 miles, 7 cents on 85 miles, 8 cents on 32 miles, and on 67 miles the rate of 2 cents per mile prevails. Appendix F includes a list of all electric railway fare increases in the United States and Canada from Jan. 1, 1914, to Dec. 1, 1917. The listed increases number 128, affecting 100 companies, several of which have made increases of different kinds or at different times, or both. Massachusetts is probably further advanced than any other State in the country in the matter of increased fares, the conventional 5-cent fare applying to only 30 per cent, of the entire mileage in the State, and to 41 per cent, of the mileage exclusive of the Boston Elevated, which system is limited by charter to a 5-cent fare. This information shows that Massachusetts has not been backward in the matter of fare increases. It is to be remembered that costs in Massachusetts are higher than in some other parts. Coal has* to come from a distance, whereas in many States water power is available to run the street railways. Labor is not less here, and expenses due to winter weather are high. To what extent the method of rate regulation now in vogue has affected the value of the street railway securities there seems room for a reasonable doubt. A study of the methods 22 RErORT OX STREET RAILWAYS. [Feb. 1918.] SENATE - No. 265. 23 of rate regulation in various States throughout the country shows that the present method of regulation in Massachusetts has its equivalent in at least half of the other States. The sus- pension clause, which is an important feature of this system, was adopted by Congress in its Federal Interstate Commerce Law in 1910. It does not appear that the fares in Massachusetts or in any State have increased in the same ratio as the labor and mate- rial expenses, and it would probably not be advisable to make a proportionate increase in fares. Increased fares are seldom productive of corresponding increases in gross revenue. When fares are increased there is usually a reduction in the number of passengers carried. There is, then, a limit to increases of fares. This Commission was not charged with the duty of studying the question of street railway fares, but it has been obliged to make some investigation of this subject in order to determine to what extent the present conditions of the street railways can be traced to the rate of fares. This Commission is not prepared to make any specific recommendations relative to in- creased fares. It is, however, of the opinion that other causes than the present method of rate regulation have contributed in large measure to the depreciation of the value of street railway securities. It is no doubt true that a fare which was allowed in 1897 could not be expected to provide the same dividend return under 1917 conditions. The Commission believes that a better understanding between the street railway's and the public will do more to improve the conditions than a straight increase of fare with no increased co-operation. 2. The Growth of the Automobile Business, This subject should be treated under two heads: — (1) The privately owned automobile which carries passen- gers, not for hire, some of whom would otherwise ride on the street cars. (2) The so-called jitney, which enters into direct competition with the street railways. (1) Privately owned Autos. — The advent of the automobile has been one of those circumstances which no human mind could foresee. In this connection the following figures are of interest : — In 1910, 31,360 automobiles were registered in this State, including commercial trucks and vehicles, but excluding dealers' cars. In 1912 the number was 50,132. In 1915 the number was 102,633. In 1916 the number was 136,809. In 1917 the number was 174,274. Of this last number, 147,310 were mainly passenger cars, i.e., with trucks and commercial vehicles excluded. Assuming that each of these cars takes away from the revenue of the street railways one round-trip ride per day, paying a 5-cent fare each way, the loss in street car revenue in a year in this State would be about $5,000,000, or nearly $15,000 per day. It is estimated that a private auto would represent two fares per day, which would otherwise be paid on the cars. Any one watching the stream of cars morning and night through the streets of Boston which lead to the business center will probably agree that such cars must represent a material loss of revenue to the Boston Elevated. The question of just how many dollars are thus di- verted from the treasury of the company is a matter impossible to estimate exactly. The above estimate of $5,000,000 per year appears reasonable. In addition to the private autos there are about 10,000 motorcycles licensed in this State, which also means a loss in revenue to the street railways. The large number of automobiles also causes a material delay to traflSc at important street intersections. (2) Jitneys, — The jitney represents a different phase of the automobile situation. In the jitney the street railway has a direct competitor for fares. The jitney operates in the same general territory as the street railway, picking off the cream of the traffic (such as the short-haul business), operating in many cases only under favorable weather conditions, and often with- out a bond sufficient to protect either the pedestrian or the passengers in the case of accidents. The jitneys often pay li- censes locally, but in many cases not proportionate to their privileges. In this State the jitneys have not been declared common carriers, and are therefore not subject to the regula- [i 24 REPOllT ON STREET RAILWAYS. [Feb. 1918.) SENATE — No. 265. 25 tion of the Public Service Commission. Certain cities and towns have bonded the jitneys so that the public is reasonably protected. As a general rule, however, it is not believed that these jitneys are so bonded. The street railway companies are thus subjected to a more or less unfair competition, by which the jitneys can operate in general how, when and where they please, without having any particular responsibility in return for their rights to engage in the transportation business. The street railways, however, must maintain their service, under all conditions of weather, in a manner satisfactory to the general public, and under the supervision and regulation of the Public Service Commission. Recently jitney competition has been so severe that the Nahant & L\Tin has threatened to cease operations unless the city will revise the conditions under which jitneys are allowed to operate. 3. Taxation and Highway Maintenance Requirements, Before proceeding with a discussion of the relative merits and defects of the present system of taxation of the street railways of this State, it will probably be well to outline concisely the general features of the present system. All of the street rail- ways in Massachusetts are taxed under the same conditions, with the exception of the Boston Elevated and its leased lines. The general system of taxation in Massachusetts includes three taxes: (1) property tax, (2) corporate franchise tax (in- cluding an additional corporate franchise or excess tax), and (.3) commutation or excise tax. In the case of the Boston Ele- vated the commutation tax is not assessed. There are, of course, in addition certain Federal and miscellaneous taxes, but these are relatively small, and need not be considered further in this discussion. . (1) Property Tax. — This tax is assessed on real estate and machinery by the local authorities. The value of the rails, wires, poles, etc., in public highways are not taxed as property, as these items are included in the value of the corporate franchise. The tax paid on property in this State by the street railways in 1916 amounted to about $890,000. This tax was paid on property which had an assessed valuation of about $45,780,000. These figures represent an average rate throughout the cities and towns having taxable railway property of $19.40 per thou- sand. Of this tax the amount not assignable to railway opera- tion amounts to approximately $71,000, representing over $3,500,000 worth of property. Tables XVII. and XX. in Appendix C show in some detail the property taxes paid by the street railways of this State in 1916. (2) Corporate Franchise Tax. — This tax, which is assessed by the State Tax Commissioner, is determined by ascertaining the fair cash value of the capital stock, which is taken to represent the true value of the corporate franchise. From such value there is then deducted — (a) So much of its capital stock as is proportional to that part of its line lying outside the Commonwealth. (b) The value of its works, structures, reat estate, machinery, etc., subject to local taxation within the Commonwealth. For this purpose the Tax Commissioner may take the value at which such real estate and machinery is assessed locally, but such local assessment is not to be taken as conclusive of the true value. After these deductions, (a) and (6), the amount remaining is known as the corporate excess, and upon this the tax is assessed, the rate being the same as that taxed on all corporations throughout the State. The tax collected from each railway company is apportioned among the cities and towns in propor- tion to the length of tracks operated in the respective cities and towns. The share of the tax in proportion to the mileage upon State boulevards, parks and reservations is retained by the State and credited to the sinking fund of the loan to which the expenditure for the particular State boulevard, park or reserva- tion was charged. The money apportioned to the municipali- ties is to be used for the repair and maintenance of the public ways and the removal of snow therefrom. The corporate franchise tax assessed on street railways for 1917 is $571,533. This tax is based on a rate of $19.47 per thousand on a corporate excess of $29,354,658. The market value of the capital stock, as determined as of April 1, 1917, by the Tax Commissioner, is $74,756,009. As noted above the 'i 26 REPORT ON STREET RAILWAYS. [Feb. corporate excess is obtained for each street railway by deducting items (a) and (b) from the market value of the capital stock. The corporate franchise tax assessed has declined very greatly since 1911, when it was at its maximum, namely, $1,236,855. At that time (1911) the tax rate was $17.93 per thousand on a corporate excess of $68,982,468. The market value of the capi- tal stock at that time was $105,298,052, and the par value was $86,600,000. In 1916 the market value was $82,962,054, while the par value was about $102,500,000. In 1916 the corporate franchise tax was $732,253, while it was only $571,533 in 1917. Thus the stock has been continually decreasing in market value, and the corporate franchise tax has diminished propor- tionately. For 1917 it is less than half what it was in 1911. For many individual railways the tax is nil. An additional corporate franchise tax sometimes called an excess tax, is to be assessed by the Tax Commissioner whenever an operating street railway company has paid in the aggregate during the year dividends exceeding 8 per cent, on the capital stock. The additional tax for every such year shall be an amount equal to such excess, except that this tax shall not be imposed unless the company has, since the date it commenced operating, paid dividends equivalent in the aggregate to at least 6 per cent, upon its capital stock from year to year. The Tax Commissioner states that no such tax has been paid by any street railway in recent years, and probably no street railway has ever paid a tax under this "excess" proviso. (3) Commutation or Excise Tax. — The commutation tax, more commonly known as the excise tax, is assessed locally on the various street railway companies. This tax, like the portion of the franchise tax distributed among the cities and to\nis, is supposed to be used for the repair and maintenance of highways and for the removal of snow therefrom. The excise tax of a street railway as assessed in any city or town amounts to such proportion of the following percentages of the gross receipts of the company as the length of tracks operated by it in public ways and places, in such city or town, bears to the total length of track operated by it in public ways and places. The percentages are based on the annual gross receipts per mile of track, and computed upon the aggregate of such annual gross receipts, as follows: — 1918.] SENATE — No. 265. 27 Per Cent. $4,000 or less, 1 More than $4,000 and less than $7,000, 2 More than $7,000 and less than $14,000, 2\ More than $14,000 and less than $21,000, 2\ ISIore than $21,000 and less than $28,000, 2J $28,000 or more, . 3 The Boston Elevated Railway, including the West End, does not pay this commutation or excise tax, but was formerly assessed a special compensation tax. This special tax, which was based on gross earnings of all lines owned, leased or oper- ated, amounted to seven-eighths of 1 per cent, of the gross earnings when the annual dividend was not greater than 6 per cent. If the dividend exceeded 6 per cent, then the sum equal to the excess of the dividend over 6 per cent, was to be paid in addition to the regular compensation tax of seven-eighths of 1 per cent. The commutation or excise tax amounted to nearly $492,000 in 1916. On a mileage basis the excise tax amounted on an average to $200 per mile of single track (mileage of Boston Elevated and leased lines excluded). The following summary shows what the taxes for 1916 amounted to as percentage of 1916 gross earnings: — Per Cent. Property tax (alllines), 2.14 Corporate franchise tax (all lines), 1.76 Excise tax (Boston Elevated lines excluded), : . . . .2.16 Compensation tax (formerly assessed) (Boston Elevated lines only), } of 1 Further information relative to taxes in 1916, and, in some cases, for years previous to 1916, will be found in Tables XVII.-XXL, inclusive, in Appendix C of this report. (4) Compensation Tax {Boston Elevated), — This tax was also distributed to the municipalities in proportion to the mileage of elevated and surface track, reckoned as single track in the vari- ous cities and towns. The Boston Elevated Railway was re- cently relieved of this tax except when dividends exceeded 6 per cent., in which case the tax was to be equal to such excess of dividends over the 6 per cent., as a result of the report of the special commission which considered the financial condition of the company and reported in February, 1917, to the Legisla- ture. This special tax was formerly assessed as a compensation "r ii 28 REPORT ON STREET RAILWAYS. [Feb. for the use and occupation of the public streets, squares and places. The compensation tax paid by the Boston Elevated for the year ending Sept. 30, 1916, amounted to $160,786. (5) Requirements relative to the Maintenance and Repair of Public Ways by Street Railway Companies. ~ The next phase of the subject under consideration is the requirement relative to the maintenance and repair of public ways by the street rail- ways. In fact, for a proper consideration of this subject it is absolutely essential to consider taxation in its relation to the requirements made on street railways in connection with repair of highways. The excise tax was primarily established in 1898, in order to relieve the street railways of certain duties relative to the highways. A brief historical sketch seems desirable at this point in order to understand the factors relating to the establishment of this excise tax, and in order to see clearly to what extent this tax has worked out in a manner equitable both to the street rail- ways and to the municipalities. The first street railway charters in Massachusetts were granted in 1853 to the Metropolitan Railroad Company of Boston and to the Cambridge Railroad Company. In both cases the street railroad company was required to maintain the portion of streets and bridges occupied by its tracks. Of course, in the early days before electrification there was considerable' deterioration of the highways due to the travel of the horses. There were various changes made from that time up to 1882. At this date the requirements were that each street railway should keep in repair the paving, upper planking or other sur- face material of the portion of streets, roads and bridges occu- pied by its tracks. If such tracks occupied unpaved streets the company was required to keep in repair an additional 18 inches on each side of the portion occupied by its tracks. Up to 1882 the street railway companies had generallv been required to conform to regulations made by local authorities as to the removal of snow and ice. In 1882 the requirement pro- vided that the board of aldermen or selectmen might establish such regulations as to the rate of speed, mode of use of the tracks, and the removal of snow and ice therefrom as the in- terest and neefl of the public might require. 1918.) SENATE — No. 265. 29 The legislation, as above mentioned, of 1882, relative to the repair and maintenance of highways and the removal of snow and ice, was in force in 1898. At this time a special committee was appointed to consider the relations between street railways and municipalities. On this special committee were Charles Francis Adams of Lincoln, William W. Crapo of New Bedford, and Elihu B. Hayes of Lynn. The committee gave much study to the question of street repair and snow removal, and came to the conclusion that the method existing at that time, — i.e., by which the street railways actually did the work of re- pairing the streets and removing the snow, — caused continual misunderstanding between the street railways and municipal authorities, and took from the local authorities the undivided responsibility which they should have over their own highways. The special committee of 1898 recommended legislation re- lieving the companies of their former duties of repair and main- tenance of highways, and in lieu of this substituted a tax based upon gross receipts. This tax, which the committee referred to as a commutation tax, was to be of a percentage on gross receipts varying with the receipts per mile of track operated, and was to be distributed in the case of each company among the cities and towns in proportion to their mileage of tracks in public ways. With regard to snow removal the committee recommended that the company should level the snow plowed by them from their tracks in such a manner as to meet the approval of the superintendent of streets, but that they should not be required to remove from the streets the snow displaced from their tracks. Briefly, this commutation tax, according to the ideas of the I special committee, was to relieve the companies of all their I former requirements as to repair of highways and removal of 1 snow from their streets. It was the intention apparently of this \ committee that such legislation should apply to all street rail- ' ways in the Commonwealth, including the lines operated by the Boston Elevated. Unfortunately, however, chapter 578 of the Acts of 1898, based on the recommendations of this committee, did not en- tirely carry out the ideas expressed by this committee. The commutation or excise tax was provided for in substantially I 30 REPORT ON STREET RAILWAYS. [Feb. the manner recommended by the special committee, and the railways were relieved in general from repairing any portion of the streets and bridges. However, the proviso was added that the company should "remain mbject to all the legal obligations imposed in original grants of locatimsr With regard to snow removal the companies were required to clear snow from their tracks in such a manner as would be approved by the superin- tendent of streets. This legislation provided that the lines of the Boston Elevated should be excluded from this act for a period of twenty-five years from June 10, 1897. Thus it will be seen that this legislation did not provide a commutation tax which should relieve the street railways of all work in connection with repair of pavements. Neither did it specifically provide that the street railway company should in no case be required to actually remove any snow from the streets. Since that time it has been decided by the courts that the "original grant of location" means the first' location granted to a street railway company by a city or town, and that an obligation to maintain or repair the public ways imposed b^ such an "original grant" is valid notwithstanding the legisla- tion of 1898. Since 1898 there have been slight changes in legislation rela- tive to these matters. At the present time the company is re- quired, with reference to snow removal, to clear snow from its tracks in such manner as will meet the approval of the super- intendent of streets, provided that no street railway shall be compelled to remove from the streets in which its tracks are located an amount of snow greater than it has cleared from between its rails and between its tracks, and from a space 18 inches wide on either side of its tracks. The special committee recommended that the amounts received by the cities and towns from this excise tax should be treated as a separate fund and applied to the construction, repair and maintenance of the public ways within such cities and towns. The legislation of 1898 omitted this recommendation as to the separate fund, but provided that the amounts received from the excise tax should be applied to the construction, repair and maintenance of the public ways and the removal of snow therefrom. Since that time certain changes have been made, one being that the 1918.] SENATE — No. 265. 31 amounts received from the excise tax, together with that re- ceived from the corporate franchise tax, should be applied to the repair and maintenance of those portions of the public ways in which the tracks of the companies were located, and the removal of snow from such public ways. However, this proviso has since been changed, and at present merely requires that the amounts received from the excise and corporate franchise taxes shall be used "toward the repair and maintenance of the public ways and the removal of snow therefrom within such city or town." As mentioned with regard to taxation, the Boston Elevated pays no excise tax, and is still required to keep in repair portions of the streets occupied by its tracks, i.e., be- tween the tracks in paved streets, and in unpaved streets for a width of 18 inches outside its tracks. The special committee of 1898 admitted that perhaps the excise tax, in the form in which they recommended it, might not prove absolutely just to all parties concerned, but they were of the opinion that it would give a reasonably fair basis of settlement. It may be interesting to see just how this excise tax has worked out during the period of nearly twenty years since that time. Two main points should be considered in connection with the study of the conditions relative to these matters. First, has this excise tax relieved the companies of the work in connection with the repair of highways in the spirit and to the extent of the recommendations of the special committee of 1898? Second, has the excise tax of itself provided an equitable basis for the commutation of the street railway duties with regard to repair of highways? Considering the first of these items, namely, whether the companies have been relieved of the street repairing, it has been proved that in many cases the companies have been required to spend large sums of money in the repair and maintenance of paving in accordance with the "original grants of location." It will be remembered that the legislation of 1898 did not relieve the companies of this burden. In many cases cities and towns have relieved the companies of such expenses, being willing to accept the excise tax as a commutation of such duties. In other cases, however, cities and towns have required the street rail- !:i: I :i 32 RETORT ON STREET RAILWAYS. [Feb. I 1918.] SENATE -No. 265. 33 ways to live up rigidly to all of the original requirements, and iiave, m addition, received their share of the excise tax In other eases the street railways have been required not onlv to repair and maintain the highways, but, in addition, to lay'im- proved pavements between their tracks whenever the 'local authorities decided to improve the pavements of such streets. The street railways have sometimes capitalized the difference between the cost of such improved pavement and what the cost would have been to merely repair or replace the old tvpe of pavement, but this has not prevented the practice from' heini? burdensome to the company. While the street railwavs have perhaps a moral right to refuse to make improvements in the pavements, etc., it should be remembered that a public service corporation is in a poor position to refuse to do what the local authorities desire. Unfortunately, it is true that there has been bargaining with street railways by local authorities. Whenever a street railway requests some privilege, such as a location for a new sidmg, even though the street railway may be well within Its rights, the municipalities often decline to make the grant without obtaining some sort of concessions. In such cases the conipany should not be held up for a new paving from curb to curb, or some similar burden. In 1916 the Bay State paid over $100,000 for the maintenance of paving in addition to its excise tax of $215,000. In the year 1916 the street railway companies paid an excise tax of nearly $500,000. This figure excludes the Imes of the Boston Elevated, which company does not pay an excise tax. The street railways are paying a further amount for maintenance of paving, which we are unable to estimate as these costs are not separated from the expenses incurred in connection with the renewals of rails and ties. The corporate franchise tax is also distributed to the cities and towns, with the requirement that it shall be used for the repair of highways and removal of snow therefrom. The State keeps a relativelv small amount of this franchise tax, perhaps $10,000 a year, due to tracks located on public reservations. The second matter is whether the excise tax as assessed at present is equitable both to the various street railways and to all the various cities and towns. Weight of equipment and speed of cars have changed, and new t^-pes of paving have come into use. The excise tax is given in detail earlier in this report as a percentage of gross receipts, this percentage varying with the average receipts per mile of track and increasing from 1 per cent, where average receipts are $4,000 or less to 3 per cent, where the average receipts per mile are $28,000 or more. For example, a small town having within its limits the tracks of a large company operating in a near-by city may receive for its share of the excise tax a revenue based on a relatively high percentage of the gross earnings, while another small town with similar mileage and track conditions may be located on a street railway having a much smaller gross income per mile of track. The second town would therefore receive a sum considerably smaller than the first town for its share of the excise tax. There is a town having 10 miles of track which receives between $3,500 and $4,000 as its share of the excise tax, while a second town having the same mileage receives only a little over $2,000 as an excise tax from another company, and whereas a third town with the same mileage receives less than $300 as its share of the excise tax. The first of these towns receives about thir- teen times as much per mile of track as does the third, namely, $m per mile of track against $30 per mile. While it cannot be said that traffic conditions are necessarily the same, the cost of highway maintenance does not vary by 1,300 per cent., as shown in these figiires. No allowance is now made for the fact that it costs much more to maintain a city pavement than a country road. In many cases the street railway runs at the side of the highway, where little maintenance expense is necessary. The excise tax paid to certain towns in 1916, compared with the money paid for the entire maintenance of highways in the sanae towns for the year ending Dec. 31, 1914, the last year for which we have figures, shows that one town paid in 1914, $2,751 for maintenance of highways, and in 1916 received $1,358 from the excise tax. In this town only 13 per cent, of the highways contained street railway tracks. Since the portion of the high- way actuaUy occupied by the tracks in a town would generally not be over 40 per cent., it is safe to say that in this town only 5 per cent, of the area of its highways contained tracks, while for this 5 per cent, of highways the amount received was equal ^^mH 34 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 35 to nearly one-half of the total expenditures for highways. An- other town received $2,130 from the excise tax and spent $2,561 for the entire cost of maintenance of highways. In this town the percentage of the length of highways in which street railway tracks are located is 15 per cent. In the case of one unprofit- able line the taxes amounted to more than the gross earnings. In its report in 1916 to the Legislature on the statutes relative to the repair and maintenance of highways in which street rail- ways are located, the Public Service Commission included a table showing valuable information on this subject. Additional information can be obtained from many sources proving that the excise tax neither relieves the street railways from many burdens relative to repair and maintenance of highways, nor is equitable as far as the individual cities and towns are concerned, although if the companies had been relieved of the burdens as intended the aggregate may have been entirely fair. Aside from the matter of the excise tax and its distribution, the general question arises as to the equity of the various re- quirements made on the streert railways relative to the high- ways, whether these requirements be in the form of work to be done on the highways by the companies themselves, or whether a tax- is assessed as a commutation of such duties. The presence of street railway tracks in a street causes some expense to a municipality. The expense may be due to the actual deterioration of the pavement near the rails, as well as to the wear due to the increased vehicular traflSc on the portion of the pavement outside the tracks. The question then arises as to what is a fair estimate of the paving expense, chargeable to the street railway, due to the actual presence of the track. The expense of laying an improved type of pavement is not an equitable charge to the company. The cost of complete re- newal of pavement even of the same type should not always be shared by the street railway. If the street railway is required to pay a sum greater than is actually required to repair the pavements that have actually been deteriorated by its presence, the real result is that the car riders are paying a tax which should be borne by the com- munity. Is it fair to ask the person who rides in the street car to pay some of the taxes which should be paid by the automobile rider? Local authorities can reduce the tax rate in their munic- ipality by this expedient, and there is little doubt but what it has been done to some extent in the past. Unfortunately, few people have appreciated this fact, and so have permitted an unfair system to develop, which can only be remedied by a complete understanding of the situation now confronting the street railways, and an urgent desire to eradicate the past defects. 4. Improvements in Service. With the development of street railways, the car rider has re- ceived quicker and more comfortable transportation. The first horse cars were unheated and had straw on the floors. To-day in Boston, and probably throughout the entire State, cars are heated by electricity at high cost. Other cities still use stoves in the cars at a less cost. Would the Massachusetts public be willing to substitute stoves for the present electrically produced heat which warms the car in a uniform and satisfactory man- ner? Within a few months a New York rapid transit line asked the Public Service Commission for permission to reduce heat in the cars to a certain point, in order to save fuel, making use of the so-called "animal heat" of the passengers. Permis- sion was granted and the experiment resulted in a vigorous protest. The issue was reflected in a mayoralty campaign, and the Public Service Commissioners were threatened with removal from oflBce for granting such permission. This illustrates to what an extent the improvements and comforts of service of yesterday become the necessities of to-day. In many other ways the comfort of the car rider has increased during recent years. The development of the rapid transit system in Boston has been marked. Over $50,000,000 has been expended in the ele- vated and subway lines operated by the Boston Elevated Rail- way. The annual rental paid for these subways will be in the vicinity of $2,000,000 when the Dorchester tunnel is completed. Thus the entire receipts from the transportation of 40,000,000 passengers every year on the Boston Elevated system are paid for rental of subways alone. In no other large city in this country, probably in the world, is there so complete a system of free 36 REPORT OxN STREET RAILWAYS. [Feb. I' ' transfer between surface and rapid transit lines as in Boston. What this means can be understood by visits to other large cities, where the surface lines are run to a great extent inde- pendently of the rapid transit lines. There are no systems in the country which have transfer stations at non-enclosed areas on such a large scale as the Boston Elevated has. Central Square, Cambridge, furnishes a prominent example. At points such as this the public transacts much business without the necessity of an additional fare, such as would be exacted in many cities. It should be noted that nearly one-half of the car riders in the State are carried on the lines of the Boston Elevated. Photo- graphs are shown in this report illustrating the development of the street car, from the horse car of the early days to the latest type of center-entrance prepa>Tnent cars recently put in opera- tion in Boston. Similar improvements in service, both as to comfort and speed, have been made in nearly all parts of the State. The cost of these improvements has been represented in general by capital investments, since at no time have the earnings been sufficient to meet these additional burdens. Many operating economies have been attained through the use of rapid transit Imes, improved equipment, etc. In connection with the con- struction of the subways and the increase in real estate values, it is unfortunate that a private company such as the Boston Elevated should have been used to boom real estate. The con- struction of the subways — particularly, perhaps, the Boylston Street and the Cambridge subways — has increased the values of real estate to a great extent. In other cities, Cleveland, for in- stance, the opposite methods have been employed. When real estate promoters desired to enhance the value of their land by providing transportation facilities they furnished money to the street railways to build the desired extensions, and in some cases paid deficits on these lines until they became paying parts of the property. This seems a much sounder principle than the real estate situation resulting in and near Boston from the construction of the subways. 1918.] SENATE - No. 265. 37 5. Non-paying Lines. The history of street railway development throughout the country has shown very clearly that many lines have been built which should never have been constructed. In the early days of electric railways prospects looked good both to the promoter and investor. It appeared that electric railways could make money almost anywhere. Consequently lines were surveyed, constructed and placed in operation fifteen years ago which to-day cannot earn their operating expenses and fixed charges. In many cases these lines probably have never paid any divi- dends. These non-paying lines may be divided into two general classes, — first, those that are independent, and second, those that have been merged into the larger companies. In the first case the lines have struggled along with fares increased, per- haps, as high as they could go without resulting in a decreased gross revenue. Ultimately, however, these lines have been forced into the hands of receivers, or else sold directly to the junk dealer. In the second case the lines have been granted a new lease of life at the expense of the parent company. Often, however, these non-paying lines were purchased at a good figure, in order to successfully carry out the desired consolidation. As an example of these non-paying lines, the Bay State calls attention to the fact that it costs nearly 50 cents per passenger on the Billerica branch. On another line it was stated that the taxes alone amounted to more than the gross receipts. A greatly increased fare does not provide a solution for such lines, since there is a limit beyond which fares cannot go with- out an actual decrease in gross revenue. The alternatives re- maining are (1) to tear up the rails for junk, (2) to carry the burden of the non-paying line by some other portion of the system, (3) to reduce expenses by the operation of one-man cars or automobiles equipped to run on the rails, or (4) in case the continuance of the line is sufficiently important to the community the company could receive some form of subsidy or community assistance. The Commission has studied the so- called trackless trolley in this connection, but does not believe that it can express an opinion on matters that are purely oper- ating in their essence. 38 REPORT ON STREET RAILWAYS. [Feb. 1018.] SENATE — No. 265. 39 6. Failure to provide for Depreciation and Obsolescence. The first question that arises when street railways fail to pay dividends is whether they are overcapitalized, due to the issue of stock without a corresponding actual investment in the property. This Commission has, like other commissions study- ing this subject, reached the conclusion that the capitalization of the Massachusetts street railways does not include any con- siderable amount of watered stock. In certain individual cases the capitalization did contain a certain amount of watered stock. This amount, however, is probably negligible as com- pared with the entire capitalization. The Board of Railroad Commissioners have had in the past, and the Public Service Commission at present have, considerable authority over the issue of stock. Only before 1893 or 1894 did the Railroad Com- missioners lack suJflScient powers to properly supervise the issu- ance of stocks. At that time the total investment in the street railways amounted to only $50,000,000, of which about half was capital stock, compared with nearly $227,000,000 invested in 1916. In 1912 the net capitalization per mile of track in Massachu- setts was $57,800 as compared with $185,600 for New York, $131,800 for Pennsylvania, $72,200 for Ohio and $78,400 for Indiana. The average for New England at that date was $61,600, and for the entire United States, $104,900. In 1916 the capitalization per mile of main track in Massachusetts was $69,935. Excluding the Boston Elevated, which had a capital- ization of $1,337,648, due to its rapid transit lines, the average for the remaining street railways in the State was $52,111. The question then presents itself whether the existing capi- talization bears a fair relation to the value of the property. The question also arises to what extent, if any, should dividends be paid on stock issued (H*iginally for equipment which has since been discarded. A more complete investigation relative to the subject of depreciation and obsolescence is necessary in order to obtain a clear understanding of this phase of the ques- tion. The following material, dealing with depreciation and its relation to capitalization, has therefore been included in this report. It is unfortunate that Massachusetts street railways have not set aside from earnings a sum sufficient to provide for de- preciation and obsolescence, — not merely providing for re- newals of machines and the piu-chase of new and improved types of cars to replace worn-out or obsolete cars, and more efficient units in the power plants, but also laying aside each year a fund adequate to meet the estimated depreciation. As the art of railroading has advanced, old types of equipment have been replaced by more improved types, even though in many cases the change was made not because the old equipment was worn out, but merely because it was more economical to operate with equipment designed according to later practice, or because the greater convenience and comfort of the public rendered such new equipment desirable. The street railways of Massachusetts have acted in this re- spect in the same manner as street railways in other portions of the country. This Commission has found that no street rail- ways have set aside a sum sufficient to take care of these items of depreciation and obsolescence. The various regulatory com- missions, including the Interstate Commerce Commission, have made their recommendations rather vague on this subject, and have apparently dodged the issue of absolutely requiring any sufficient sum set aside for this purpose. In case a new type of car was purchased it has been customary to capitalize the differ- ence between the cost of this car and the first cost of the old car which it replaced. In many cases, however, the entire cost of the new cars has been capitalized. Thus, the property repre- sented by some of the invested capital has been withdrawn from service without a corresponding reduction in the outstanding securities. To this extent, then, have dividends been paid on unused and obsolete property. Identical results have been found relative to the steam railroads. This failure to provide for proper depreciation and obsoles- cence has been fully realized only during the past few years. Under the conditions of to-day, where the costs of labor and material are so high, the failure to provide for depreciation is' the more marked. No one set of persons is responsible foor this condition. The Massachusetts street railways have surely been at fault, but no 40 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE - No. 265. 41 more so than the street railways throughout the country. Moreover, the Public Service, or similar commissions in the various States, has never required the street railways to set aside sufficient sums for this purpose. Changes have been so rapid in the art of street railroading that it would have been impossible to determine just how much money should have been set aside for these purposes. But the fact remains that a sum should have been set aside to cover depreciation and obsoles- cence. This is no time to elaborate on the mistakes of the past, ex- cepting in so far as it may be necessary in order to show what effect these errors of judgment have had in bringing about the conditions now confronting the street railways. In some of the recent franchises granted to street railways there has been a definite attempt made to provide for a substantial depreciation fund to be set aside out of earnings. In Dallas, Tex., a new franchise has been put into operation within the last few months. The Dallas plan, mentioned elsewhere in the report, represents one of the latest types of the so-called service-at-cost plans. The Dallas franchise provides for a repair, maintenance and depreciation reserve. The following quotation from the fran- chise outlines the purpose of this reserve: — The grantee covenants that it will at all times keep all its property, including the property embraced in said lease from Northern Texas Trac^ tion Company, in good and businesslike order and repair, and, as a whole, in condition to give effective service. To this end, and to the end also that replacements and renewals may be made from time to time as neces- sary to maintain the property in such condition, and to offset deprecia- tion in the physical condition of the property as a whole, and that new types of equipment may be introduced to supersede those that become antiquated or obsolete according to commonly accepted commercial standards in the business, the grantee will set up, in the manner herein- after provided, a repair, maintenance and depreciation reserve, and will use the same when and to the extent necessary for such purposes and for those purposes only, save as hereinotherwise provided. It is provided that at the beginning of each calendar month the company shall, after paying the operating expenses, apply toward the creation and maintenance of the repair, maintenance and depreciation reserve an amount equal to 10 per cent, of the gross receipts for such month. It is next provided that after certain payments to the accident reserve, a dividend amounting to 5 per cent, per annum, that is, five-twelfths of 1 per cent, for such month, shall be paid on the property value. It is further provided that for every additional one-twelfth of 1 per cent, set aside for the payment of dividends on property value there shall be added to the repair, maintenance and depreciation reserve an amount equal to 3 per cent, of the gross receipts for such month. After all the foregoing payments have been made, the balance of the gross receipts for the month shall be added to the repair, maintenance and depreciation reserve until total additions from all sources for the then current calendar year shall amount to 18 per cent, of the gross receipts during such year. The repair, maintenance and depreciation reserve shall be considered nor- mal whenever the amount equals 6 per cent, of the contempora- neous property value, until such time as the fares are reduced to Item B on the fare schedule. After such time this reserve shall be considered normal when the amount equals or exceeds 10 per cent, of the contemporaneous property value. Whenever this reserve is maintained at normal the company may pay the full amount of the then allowed rate of return on the property value. Summarizing, the Dallas plan provides for the payment of 5 per cent, dividends after a certain sum (10 per cent, of the gross receipts for the month), has been set aside for the repair, maintenance and depreciation reserve. Further payments in dividends are then authorized only as the repair, maintenance and depreciation reserve is also increased, the normal amount of such reserve being increased if it is below normal. The normal amount of such reserve is 6 per cent, of the property value on the top schedule of fares, and 10 per cent, of the property value if the next lower schedule of fares is in opera- tion. The Cleveland service-at-cost plan provides for a mainte- nance and renewal fund. The following quotation from the franchise shows the purpose for which this fund is provided: — The intent hereof with regard to the sum authorized by section 20 hereof to be set aside for maintenance, depreciation and renewal is to i tl 42 REPORT ON STREET RAILWAYS. (Feb. 1918.] SENATE — No. 265. 43 enable the company to maintain, renew, replace, preserve and keep its railway system and property, and every part thereof, and all extensions, betterments and permanent improvements hereafter made pursuant hereto, in good condition, thorough repair and working order, the standard of such condition, repair and working order being an average for the entire system of 70 per cent, of its reproduction value. This fund is maintained by setting aside a certain sum per car-mile operated. The car miles are defined as revenue miles, exclusive of car-house and car-yard miles, made by cars equipped with motors, and 60 per cent, of the said rate of simi- lar miles made by trailers. It is provided that in January, February-, March, April, May and December 4 cents per car- mile shall be thus set aside; in November, 5 cents per car-mile; and in June, July, August, September and October, 6 cents per car-mile. It is further provided that the amounts set aside per ear-mile for maintenance and renewal may be increased or de- creased by agreement between the city and the company, or, in the event of disagreement, such increase or decrease in the car-mile allowance shall be submitted to arbitration. The sum so set aside shall, if not needed for immediate maintenance or renewals, be accumulated, and may from time to time be in- vested in the bonds of the company or in the payment of its floating indebtedness to the extent that the same form part of the capital value of the con^>any. In the ordinance adopted in Kansas City, Mo., it is provided that at the beginning of each fiscal year the board of control shall determine what percentage of the gross earnings for that year shall be used during that year for maintenance, renewals and depreciation. The amounts so determined for any year for maintenance, etc., shall not be less than 16 per cent, of the gross earnings in the previous year. If the full percentages of the gross earnings assigned for this purpose shall not be actu- ally expended, the balance shall be set aside for the same pur- poses during the next or any succeeding year. It is provided that the percentages fixed as above shall in no wise limit the obligations of the company to keep the property in first-class condition. The allowance provided in the above franchises show clearly what a considerable sum of money is now considered necessary to make proper allowance for depreciation and obsolescence. Any attempt at a solution of the street railway problems in Massachusetts which does not provide for the setting aside of some such substantial sum cannot provide a satisfactory solu- tion. Any such remedies would be merely temporary, and within a few years the same problems would appear in an even more intensified fashion. In the consideration of depreciation and obsolescence the matter of rehabilitation of lines has not been mentioned specifi- cally. These matters are closely allied. All of the recent plans, such as those of Cleveland, Dallas and others, make provision for the expenditure of a considerable amount of money dis- tributed over a short period of years for a rehabilitation and extension of lines. It is generally provided, also, that the cities shall have considerable voice as to the conditions under w^hich such expenditures shall be made. Summarizing, it is admitted by all that the street railways in Massachusetts, as well as elsewhere, have not made proper provision for depreciation in the past. The street railways are in part to blame for lack of foresight and judgment. This error has been made by the street railways in all parts of the country. The regulatory commissions should have required funds set aside for depreciation, but this same failure has been made by other regulatory commissions elsewhere. 7. Lack of Cooperation between the Street Eailways and the Public, As mentioned earlier in this report there has been little ap- preciation of the fact that the public and the street railways are really partners in the transportation business. A spirit of fair play should then be exhibited by both parties at all times. This Commission has visited the more important cities in the United States, studying transportation conditions and discuss- ing the various street railway problems with the street railway and the public officials. The Commission has found that wher- ever there is co-operation between the public and the street railways, such co-operation is reflected in the resulting street car service. Cleveland has been pointed out as tbe city where a 3-cent ' t / REPORT ON STREET RAILWAYS. [Feb. I l^l^-l fare prevails. Although Cleveland does not in reality have a 3-cent fare, as will be discussed later, it has progressed as much or more than any other American city in the solution of certain of Its street railway problems. A service-at-cost plan is in oper- ation in Cleveland. The main features of this plan are that the street railway is assured a definite rate of return on a fixed in- vestment value, and that a sliding schedule of fares is arranged If a certam fare does not provide the proper revenue, a fare slightly higher is put into effect. If, however, the particular fare m operation yields more than the specified return, the next lower fare goes into effect. There is a reserve fund which acts as a balance or buffer to the system, preventing constant fluc- tuations of fares due to seasonal conditions, etc., but so arranged that substantial decreases or increases in the fund automatically bring into action higher or lower fares, as the case may be At the present time the cash fare is 4 cents, three tickets are sold for 10 cents, and a charge of 1 cent is made for a transfer with no rebate. When this plan was first put into operation the fare was 3 cents cash fare, 1 cent transfer, no rebate. The fare re- mained at this figure, except for a short time, until December, 1917, when two increase steps were made reaching the present rate of 4 cents cash fare, three tickets for 10 cents, 1 cent trans- fer and no rebate. A realization of what a 1-cent charge for a transfer means should convince any one that it is a misnomer to refer to such a schedule as a 3-cent fare. Moreover no change is given in Cleveland by the conductor if a nickel is proffered for the fare. Aside from the matter of fares, there are many other points of interest in the Cleveland system. The city appoints a street railway commissioner who has a considerable amount of control over the operation of the lines of the company. In this city one does not see surface cars crawling through city streets be- hind a string of vehicles. The patrons of the railway realize that they are the losers when traffic is delayed, hence the street cars have the right of way. The Commission has found that in similar matters the public appreciates the fact that the quality of the street car service is governed to a great extent by the attitude adopted by the car riders. In the Cleveland plan ar- bitration proceedings have been provided, but these proceedings have been used but once, and then in a friendlv fashion on a SENATE — No. 265. 45 matter concerning the wisdom of certain expenditures in con- nection with new plant or equipment. More detailed informa- tion concerning Cleveland may be found in Appendix F. Dallas, Tex., has recently adopted a service-at-cost plan, involving certain features of the Cleveland plan. At Dallas the plan calls for a sliding dividend rate as well as a sliding scale of fares. It is provided in this plan that as the fares are decreased in the scale the dividend rate is increased. This plan provides, however, that the maximum rate of fare shall be used at the start, rather than having the fares start in the middle of the schedule as at Cleveland. Thus at Dallas there is not a definite guarantee that the maximum allowed dividend rate will be maintained. Other plans involving some form or other of partnership have been put into operation in Des Moines, Kansas City and other places. The foregoing has been given to illustrate what has been done in other cities in recognition of the fact that the public and the street railways should be partners. Unfortunately, these con- ditions have not prevailed in Massachusetts. It has been a common practice in this State for the public to look upon the street railway companies as objects of suspicion and dislike. Whether or not there has been any justification in the past for such a feeling, such thoughts at the present time form a barrier, which until surmounted precludes even the possibility of a sat- isfactory solution. The actions of local authorities in the past in making unreasonable requirements on the street railways, even though perhaps legal, have seriously hindered street rail- way development. In other cities improved service has been attained by skip- stops, limited cars in rush hours and similar devices. In order that such schemes will result in improved service the co-oper- tion of the public is vitally necessary. The following note from a recent Boston daily newspaper is interesting: — In these days of restricted passenger transportation in the United States, and the rush of flying wedges of humanity through terminal sta- tions to board steam and trolley cars, it might be well to recall that "they also serve who only stand and wait." Frequently those whohavenot sought to crowd themselves into cars already filled, but have stood quietly by and waited for the next one, have found better accommodations, and 1 « REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE - No. 265. 47 almost as speedy service. Transportation officials in charge of the trolley systems in large cities declare that 20 per cent, of the delays and incon- veniences in the surface, elevated and tunnel service is due to the in- sistence of patrons on riding on the first car, notwithstanding another is following close behind. While these matters individually may appear small they do constitute a considerable factor in the street railway service in this State, and any remedy which may be applied to them will certainly result in better transportation conditions. The Commission believes that a proper consideration of these matters can readily result in comprehensive plans, which will provide increased and better service, and will make provision for a rehabilitation of the properties of the street railway com- panies. Conclusions. After a careful study of the present situation, relative to the street railways in this Commonwealth and of the causes leading up to these conditions, this Commission has reached certain definite conclusions. The entire problem concerning street rail- ways must be approached from the viewpoint of the community of interest of the public and of the street railway. If the street railway service is to be maintained, improved and extended every person in the Commonwealth must be brought to the realization that the service is operated in his interest and for his benefit. Considerable study has been given to the subject of public ownership of street railways, and the Commission has reached the conclusion that public ownership at this time is unwise in Massachusetts. Recommendations. The Street Railway Investigation Commission makes the fol- lowing recommendations, and submits in Appendix A proposed legislation embodying these recommendations. 1. Jitneys. This Commission recommends that the so-called jitney be declared a common carrier and placed under the supervision of the Public Service Commission. The Public Service Commission shall, if it deems it advisable, bond the agencies operating such vehicles to such extent as public safety may require. Proposed legislation may be found in Appendix A, 1. 2. Autos operated by Street Railways. This Commission recommends that the street railway com- panies be allowed to operate motor vehicles (not running on rails or tracks) as auxiliaries or feeders. Such vehicles shall be placed under the supervision of the Public Service Commission to the same extent as the jitneys. Proposed legislation will be found in Appendix A, 2. 3. Trolley Freight. This Commission recommends that the authority to grant permits to street railways to become common carriers of news- papers, baggage, express matter and freight, now vested in the local authorities, shall be transferred to the Public Service Commission. Proposed legislation will be found in Appendix A, 3. 4. Taxaiion and Highway Maintenance, This Commission recommends the abolition of the commuta^ tion or excise tax and the passage of an act requiring street railways to maintain in good repair, but not to renew or re- place, the paving, upper planking or other surface material, or the base thereof, between the rails and tracks, and, in the case of unpaved streets, for 18 inches outside the rails. When this surface is renewed or replaced by the municipality it shall assess on the street railway company one-half of the labor cost incurred in such renewals or replacements in the portion of the highways between the tracks. The remainder of the labor cost and the entire material cost shall be borne by the municipality. This act shall include the Boston Elevated and its leased lines, and any conflicting statutes shall be hereby repealed. Proposed legislation will be found in Appendix A, 4. 5. Alteration of Location of Tracks to allow for the Use of Improved Equipment, This Commission recommends that if a municipality refuses to grant a street railway permission to alter its tracks in order 48 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 49 that a more improved type of equipment may be used, the right of appeal shall be had to the Public Service Commission on this matter. The Public Service Commission shall then, after notice and a public hearing, determine whether public necessity and convenience require the granting of such petition, and shali then dismiss the petition or require the street railway to make the necessary alteration in the location of its tracks. Proposed legislation will be found in Appendix A, 5. 6. Alteration of Location of Street RaUway Tracks in Highways. This Commission recommends that if an alteration is made in the location of street railway tracks in highways, no portion of the expenses of such changes shall be borne by the street rail- way, except when such alterations are made upon petition of the street railway company. Proposed legislation will be found in Appendix, A, 6. 7. AUeration or ConMrm^ion of Bridges upon which Street Rail-- way Tracks are located or are to be heated. This Commission recommends that street railways shall not be obliged to bear any expenses in connection with the altera- tion, strengthening or construction of bridges or the approaches thereto, even when such changes may be due in part to the fact that street railway tracks are located, or are to be located, on such bridges. Proposed legislation may be found in Appendix A, 7. 8. Service-at-cost Plan, This Commission has visited the city of Cleveland, where a so-called service-at-cost plan has been in operation for several years. Under this plan a sliding scale of fares is provided so that the fare in effect at any time is just sufficient to pay for the "cost of the service," such "cost of the service" including . an aUowance for depreciation and the payment of a definite re- turn on a fixed investment value. A reserve fund is provided so that seasonal or other temporary conditions will not cause a continual fluctuation of fares. If this reserve fund becomes di- minished beyond a certain point the next higher schedule of fares is put into effect. Correspondingly, if this fund reaches a point substantially above its normal amount the next lower schedule of fares becomes operative. The present schedule of fares in Cleveland is 4 cents cash fare, three tickets for 10 cents, 1 cent transfer and no rebate. This fare schedule, which has been in effect only a month or two, represents an increase of two steps in the scale since last fall. The first increase was so slight that it failed to yield a substantial change in the revenue, and so the second step was made shortly after. This Commission has found that the fares in Cleveland have been very steady under the operation of this plan, and there has been no evidence of rapid fluctuations of fares and consequent unsettled conditions. The Cleveland plan provides for a depreciation reserve, to which definite sums shall be added each month before the pay- ment of dividends. The investment value on which interest and dividend returns are to be made was fixed in the franchise. Provision was made for additions to this investment value of such funds as are in- vested in the property, with the approval of the proper author- ities. The authorized rate of return is fixed at 5 per cent, on that portion of the investment value represented by bonded indebtedness, and 6 per cent, on the remaining portion of the investment. The city appoints a street railroad commissioner to supervise the operation of the street railway under this plan, and in him is vested a great deal of authority. Various other features of this plan are given in more detail elsewhere in this report. The Commission has become con- vinced, both as a result of its visit in Cleveland, and due to its study of other plans, such as the Dallas service-at-cost plan, that such plans have considerable merit. This Commission be- lieves that the adoption in Massachusetts of a plan whereby ^ the public is assured satisfactory service at the lowest possible cost, whereby the street railway company is assured a satisfac- ,tory return on capital honestly and prudently invested, and whereby ample provision is made for depreciation, rehabilita- tion and extensions and improvements of line, will place the street railways once more on a sound financial basis, so that capital needed for future improvements and extensions may be ! I ^^ \ 50 REPORT ON STREET RAILWAYS. [Feb. readily secured. The intent of this Commission is that such a plan will provide a satisfactory solution of the problems now confronting most of the street railwaj-s in this State. This Commission is convinced that no plan other than direct finan- cial assistance by the municipalities or by the State will solve the problems of some of the poorer lines, which cannot earn even their operating expenses and fixed charges. Proposed serA'ice-at-cost plans have been submitted to thU Commission by representatives of the street railwavs and the myestors, as well as by the members of the Public SeWice Com- mission While these plans are based on the fundamental idea of a slidmg scale of fares, reserve and depreciation funds, and a more or less fixed rate of return on a fixed investment value the details yarj- widely. This is especially true in the case of the determmation of the proper investment value on which returns are to be paid. The problem is complicated by the fact that in Massachusetts most of the street railways operate in several cities and towns: for mstance, the Boston Elevated operates in over a dozen municipalities, while the Bay State operates in nearly fifty cities and towns. The Cleveland idea of supervision by the municipality would have to be modified considerably to fit the Massachusetts situation. Apparently some method involving the division of the State into districts would have to be worked out, and such details could not be finally decided upon untU .t was known which street railways were planning to accept this plan. 0«mg to the complexity of the problem and the limited time at its disposal this Commission has not deemed it expedient to submit a definite bill, limiting the scope of the plan at this stage to a particular set of provisions. Four service-at- cost plans, which have been presented before this Commission are mcluded in Appendix A, 8. This Commission recommends the adoption of a service-at- cost plan which shall embody the following fundamental fea- tures: — ^''1:r ^^l ^'^^^^^^^^^^ of a sliding scale of fares, so ar- ranged that when the schedule of fares in operation does not yield a revenue sufficient to pay the "cost of the service" the next higher schedule of fares shall become effective, and so that 1918.] SENATE — No. 265. 51 when the fares yield a revenue greater than the "cost of the service" a corresponding decrease in the rate of fares shall be made. . Second.— The creation of a reserve fund, which shall be raised by each street railway accepting this plan, and which shall serve as a balance wheel on the system, so that a rapid fluc- tuation of fares due to seasonal or other conditions may be eliminated. Third. — The establishment of a depreciation and mainte- nance fund, so that the street railway properties shall be kept up at all times to the proper operating efficiency, and so that new and improved types of equipment may be purchased as the art of street railroading advances. Fourth. — Provision for the rehabilitation, extension and im- provement of lines during a period of years following the accep- tance of this plan. Fifth. —-A director to be appointed by the Governor of Massachusetts to the board of directors of each street railway operating under this plan. Sixth. — Superyision of the street railways accepting this plan by district representatives, appointed by the Governor or by the Public Service Commission; these local supervisors to report to the Public Service Commission, or to a special depart- ment thereof; the expenses of such supervision to be borne by the street railway companies, but in no case to exceed a certain fixed percentage of the operating expenses of the individual companies. iSeren/A. — Provision for arbitration proceedings relative to certain conditions which might arise. Eighth. — Provision whereby the State, or any political sub- division thereof, may purchase the entire property of a com- pany, accepting this plan, at its determined investment value, or under any other provision of existing or future statutes. Ninth. — A return to the investors of 6 per cent, per annum on a fixed investment value, the amount of such investment value to be determined by the Public Service Commission, and to include such sums as have been prudently and honestly in- vested and conserved with proper diligence, due consideration being given to the present physical condition of the property; 52 REPORT ON STREET RAILWAYS. [Feb. the investment value from time to time to be increased by such sums as the Public Service Commission shall certify have been prudently spent and are properly chargeable to capital. ,, ™- ~ '^^ acceptance of such a plan to be optional with tlie mdividual companies. El^enth. - Legislation allowing the Boston Elevated (includ- ing Its leased lines) to accept this plan. Tu-elfth. — In case the service-at-cost plan is accepted by any street railway company, such funds as the Public Service Com- mission shall consider necessary for the establishment of the reserve, depreciation and rehabilitation funds, or for improve- ments immediately necessary, shall be raised by an issue of capital stock, either preferred or common. ACKNOWXEDGMENTS. This Commission wishes to express its indebtedness to all those persons who have given so freely of their time in connec- tion with this investigation. The members of the Public Serv- ice Commission have at all times coH)perated with this Commis- sion to the fullest extent, and have aided materially in this study. The Commission owes much to the street railway and the public officials of the cities it visited, who afforded the mem- bers of this Commission such excellent opportunities to learn of street railway conditions in those cities. A considerable amount of the data included in the appendices of this report has been collected by correspondence, and the Commission wishes to take this opportunity to thank these per- sons who have so readily supplied this information. The Com- mission wishes to thank Prof. Martin J. Shugrue of the Massa- chusetts Institute of Technology, who has compiled much of the data relative to public ownership of street railways and to street railway conditions in foreign countries. To the officials of the cities and towns, of the street railway companies, and of the various organizations who appeared at the hearings, this Commission wishes to extend its thanks The Commission also wishes to express its appreciation of the services of Mr. Edward J. Dunn, former clerk of the Commis- sion who was obliged to give up these duties, owing to pressure of other business, and of those of Mr. John B. Babcock 3d 1918.] SENATE — No. 265. 53 clerk of the Commission during the latter part of this investi- gation. Messrs. Gibbs, Hays and Forbes, all of whom sign this report, present certain dissenting statements which are given following the signatures. Respectfully submitted, m JOSEPH W. MARTIN, Jr., Chairman, CHAS. W. ELDRIDGE. JAMES L. HARROP. JOHN M. GIBBS. MARTIN HAYS. MICHAEL J. FITZ GERALD. W. CAMERON FORBES. GURDON W. GORDON. 54 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 55 DISSENTING STATEMENTS. Dissenting Statement of John M. Gibbs. Although having signed the report and subscribed to the gen- eral principles contained therein, I feel, however, that further relief should have been granted to the Boston Elevated in the matter of tunnel and subway charges and rentals, in order that the burden of street railway transportation should to a greater extent be distributed between the car riders and the property o\\Tiers and business men, who share the benefits of such trans- portation equally with the car-riding public. I also feel that in the service-at-cost plan, as recommended in the report of the Commission, capital actually and honestly invested has not been sufficiently safeguarded under the method of determining the "investment value*' as recommended, since I fear that undue consideration may be given to the present physical con- dition of the properties. JOHN M. GIBBS. Dissenting Statement of Martin Hays. So far as the Boston Elevated Railway is concerned, I favor the principle involved in the service-at-cost plan, and I believe that it is the duty of the Legislature to make every possible endeavor to maintain a 5-cent fare. With that end in view I advocate the reduction, or even the elimination, of subway and tunnel rentals, and the remission of burdensome contributions for highway and bridge construction and maintenance. MARTIN HAYS. Dissenting Statement of W. Cameron Forbes. I sign the report in the assumption that the Public Service Commission will consider it to be their duty to save the street railways of Massachusetts from going into bankruptcy. In determining the "investment value" provided in the service-at- cost plan, I think the sole requirement should have been money prudently and honestly invested, and if the Public Service Com- mission should make the mistake of interpreting the words "requiring consideration of the present physical condition" as requiring a further appraisal of all the railways, the time alone necessary for such appraisal, apart from the cost, will be disas- trous to an important percentage of the street railways in this State, and will nullify in a large measure any benefits to be hoped from this legislation. If this Commission had meant physical valuation it would have said so, and I sign the report in the assumption that the Public Service Commission will in- terpret the words "physical condition" to mean that railways shall be allowed to avail themselves of the service-at-cost plan to the full value of the money prudently and honestly invested, when they know that the physical condition of the property is such as to assure satisfactory operation and safety and comfort to the traveling public. I concur with Messrs. Gibbs and Hays that an important proportion of subway rentals should be borne by the com- munity, and I personally believe that the Boston Elevated should be relieved to the amount of at least one-half of the subway rentals. I feel that the report should have set forth the principle in which I feel sure every member of the Commission will concur, ■—that every effort should be made to keep the fares low, in order to reduce the burden upon the riding public. No evidence was submitted to the Commission that justifies the charge that the construction of subways has been made in Boston to boom real estate. I dissent from anything in the report to that effect. W. CAMERON FORBES. 56 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 57 DISSENTING REPORTS. Dissenting Report of George M. Worrall. Private ownership and operation of street railways under the present policy in Massachusetts has broken do\m, resulting in loss of confidence by the investor because of depreciation in value of their stock and failure to pay interest on the same, and of the riding public because of the poor, insufficient, and, in many cases, dangerous service. Any plan for the improve- ment of these conditions must be based upon the confidence and good-will of both the investors and the riding public. This co-operation can be best secured by public ownership of street railways, which would give to the Commonwealth com- plete control of service, and make its representatives directly responsible to the people. I therefore recommend that the following question be submitted to the people at the annual election in November, 1918: "Shall the State of Massachusetts take over the street railway systems at an estimated cost of $250,000,000?" Investigation of the condition of street railways proved con- clusively that, with two or three exceptions, every company in the State is facing bankruptcy. No other agency comes in as close contact with the people, has as much to do with valuation of property and the prosperity of the workers, and the Com- monwealth itself, as the street railway system. It is therefore imperative that relief should be given at once. Recognizing the fact that, with the favorable vote of the people, it would take at least two years to work out a plan of public ownership, and that relief must come at once, I recommend the adoption of a service-at-cost plan which will give the representatives of the State ample power for regulation of service, to the end that the service in Massachusetts shall be of the high standard which its people have a right to expect, and which will insure to the in- vestors the return of 6 per cent, on their honest investment. In order to make this possible I make the following recommenda- tions: — 1. That a street railway commission of three members be appointed by the Governor, or that an additional member be added to the Public Service Commission, making six, and that three members of that Commission be designated by the Gov- ernor as a street railway commission. This commission is — (o) To have mandatory powers in regard to service, types of cars and all other matters relating to the operation of street railways. (6) To determine the true value of any street railway which desires to adopt the service-at-cost plan. "True value" is to mean the actual cost of the property less depreciation. (c) To order, in addition to the reserve and depreciation funds, provided for in the Commission's report, the establish- ment of a rehabilitation fund, which shall be not less than 5 nor more than 10 per cent, of the true valuation. This fund is to be used within a period of three years for the purchase of new machinery and cars and general improvement of the service. (d) To order all street railways in Massachusetts to sell all real estate in their possession, not actually used for street rail- way purposes, within one year, the loss, if any, to be charged over a period of ten years to depreciation. (e) Not to allow street railways to be represented at the State House or before their commission by other than their regular attorneys or officers of the company. 2. That the investor shall be allowed a return of 6 per cent, on the true value of the property. 3. That the Commonwealth of Massachusetts may at any time take over all the property of a street railway system by paying the true value plus any amount expended for improve- ments authorized by the Commission. 4. That the franchise tax be 5 per cent, on the net earnings, instead of the tax now in vogue. It is to be regretted that your Commission has been unable to receive any information from the Public Service Commission in regard to the investigation which they have been making of fl 58 REPORT ON STREET RAILWAYS. [Feb. the Boston Elevated system. It would seem as if some help might have been obtained from the high-priced expert they had in their employ for this specific purpose. Property in metropolitan Boston has been greatly increased in value by the extension of the Boston Elevated and the sub- way systems. It is only fair that because of these increased values and rentals the general taxpayer should relieve the strap hanger of some of the expense of maintaining this system. I therefore recommend that the Commonwealth buy the subways, allow the Elevated to use them at a normal rental, and assess an amount sufficient to pay interest and cost upon the district serA^ed. It is my opinion that if this plan is followed fares need not be increased in Boston, and that after the war is ended, under normal conditions, it would be possible to have a 4-cent fare in this district. Any relief given the Elevated should pro- vide for a reduction in fares to Hyde Park. It is manifestly unfair that Hyde Park should pay the price they now do while other sections pay a straight 5-cent fare. There are many roads in Massachusetts which cannot come under the service-at^jost plan. While most of them pav no dividends they are of vital importance to the community which they serve. In order that the people may continue to have the benefit of these roads, I recommend — 1. That cities and counties, by vote of their official represent- atives, and towns by vote in town meeting, shall have the right to appropriate money to aid in the operation of street railways. 2. To abate real estate taxes and to relieve street railways of repairing between tracks. 3. That they have the right to buy street railways at a price not to exceed their true value. I concur with the majority of the Commission in the reme- dies offered for — 1. Jitneys. 2. Autos operated by street railways. 3. Trolley freight. 4. Taxation and highway maintenance. 5. Alteration of location of tracks to allow for the use of improved equipment. 6. Alteration of location of street railway tracks in highways. 1918.1 SENATE — No. 265. 59 7. Alteration or construction of bridges upon which street railway tracks are located or are to be located. As all parties have in various ways contributed to the down- fall of the street railway, it would be wise if they would unite in an effort towards its upbuilding, in order that the splendid reputation of this State as a leader be maintained. Respectfully submitted, GEO. M. WORRALL, Dissenting Report of George Bunting. In my judgment the provision of adequate transportation facilities is as clearly a public function as the provision of pure water, and a function quite as vital to the public health and the general welfare of our industrial and commercial centers of population. Intrusting it to private initiative with the incentive of private profit was a mistake from the beginning, and the longer we delay to correct it by taking over the street railways under public ownership and public operation, the heavier will be the cost and the greater the handicap of fixed charges which must be met. If the recommendations of the majority are adopted, the in- evitable result will be greatly to increase the price which the State will ultimately be obliged to pay in taking them over. Public ownership is generally admitted to be inevitable. Its further postponement can only mean the further enrichment of private individuals at the expense of the health and comfort of the traveling public and the perpetuation of unnecessarily high cost of transportation. The policy of regulation, accompanied by financial aid from the public treasury, has been thoroughly tried, and has proved a dismal and confessed failure. The farcical results of State rep- resentation on the Fitch burg and Boston & Albany director- ates can hardly be forgotten. The Federal government has now at last been compelled to take over the railroads as a war measure, as the only possible t WMirt-, jf "^ii jjMiKSJt* M» ,.,gt*J^flfc,^ Jt^. 60 REPORT ON STREET RAILWAYS. [Feb. I ^^^^'^ SENATE — No. 265. tn means of securing the efficiency in operation which private management had failed to provide, and which is indispensable to the successful prosecution of the war. But the efficiency in transportation service is essential in peace as well as in war and the breakdown of the privately owned street railwavs in Massachusetts has been and is much more complete, tak^n as a whole, than that of the steam lines, both in respect to the service rendered and from a financial standpoint. The plan of private ownership of transportation facilities is m fact, so fundamentally wrong in principles that it can never be made successful by any makeshift proposition. The interest of the managers and shareholders is necessarilv diametrically opposed to the public interest. Their interest is to secure from the travehng public the highest possible dividends and salaries that the traffic will bear, or, in other words, to make the car- mile earnmgs yield larger dividends; but they imply also short hauls and cars crowded by strap hangers. It is also to the interest of street railways to congest city populations in the smallest possible compass, whUe it is to the mterest of the community to distribute population as widely as may be. Rightly considered, transportation is the control- Img factor m the better-housing problem and the attempt to provide opportunities for wholesome living and health-giving recreation for the vast majority of city dwellers. High rents and madequate housing, with the insanitary conditions of travel m overcrowded street cars, are costly consequences of private ownership of the means of transit in comparison with which the excessive fares which fictitious capitalization and past wastes of management are now obliging the companies to demand shrink into relative insignificance. City planning, the abolition of the slums, and the social-wel- fare aims all must rest satisfied with hardly perceptible mitiga- tions of the evils of congestion until we have public ownership ot the street railways, for private ownership does not and never can permit the city to build in a far-sighted wav, or to treat transit as an integral part of city building. And the effect of private ownership upon the high cost of living is apparent at once. These are lessons which Europe learned long ago, after private ownership under public regulation had been thoroughly tested and found ever^n^here to be, as Bismarck declared forty years ago, a complete failure. All the countries of Europe, except Great Britain and France, have long owned their steam railroads, and except in France and Belgium the street railways are generally under public ownership also. In none of these countries is there any move- ment away from the public ownership, for in all of them better and cheaper service, shorter hours and better wages for em- ployees, and a more scientific and economical development have resulted from public ownership and operation in those countries. The political evils which result from private ownership of transportation facilities are too notorious to require extended comment, although these evils themselves would justify taking over the lines even if none of the other advantages which have been enumerated were to be expected. If our public servants are so much more ineflScient and corrupt that the benefits which have resulted from public ownership abroad are not to be hoped for here — a slander w^hich the comparative records of the publicly owned post ofiice and the privately owned express companies ought sufficiently to refute — the transportation corporations more than any other single corrupting agency are responsible. So long as the money and the influence of the transportation corporations continue to be felt in elections and appointments to office we shall have a public service honey- combed by corporation agents, and the profession of politics, which ought to claim the best of our citizenship, will continue to be in disrepute, especially in our own large cities, among the very individuals who, by intelligence, business capacity and public spirit, are best adapted for public trusts. The national crisis is bringing such men to the public service by thousands to-day. When the managers of our street car lines are relieved of the necessity of currying favor with finan- cial magnates, of running elections, and of placating politicians, the direction of local transportation will also be recognized uni- versally as an honorable and patriotic service, and will attract public-spirited citizens who may now be repelled from it. Respectfully submitted, GEORGE BUNTING. ( li^ a2 REPORT ON STREET RAILWAYS. [Feb. 1918. Dissenting Report of John L. Donovan. I dissent from the report of this Commission, since I believe that this matter should be considered further in the interests of all the people in this Commonwealth. I believe that many of the powers delegated to the Public Service Commission, when it was formed in 1913, should be taken away and vested once more in the Legislature. When the Railroad Commission was enlarged in membership and its powers increased it was believed that better conditions would result relative to street railway matters. The contrary, has however, been the case, and neither the people nor the railways have been benefited. During the period since the establishment of the Public Service Commission the market value of street railway securities has dropped to a great extent, and the service maintained by the street railways has dwindled. I would consider any means of relief which would result in a fare of 5 cents or less in Boston, and which would provide the public with good street railway service. APPENDICES. Respectfully submitted, JOHN L. DONOVAN. .; li /v w i mi Il ('^•^tu ;i Appendix A. PROPOSED LEGISLATION. An Act relative to the Powers and Duties of the Public Service Commission. Be it enacted, etc., as follows: Section 1. Section two of chapter seven hundred eighty-four of the acts of the year nineteen hundred and thirteen is hereby amended by adding at the end thereof the following: — d. The transportation and carriage of persons between points within the commonwealth upon a stage route, bus line, motor vehicle line or route, or by motor vehicles used or operated in connection therewith. The agency operating any such vehicle or over any such route shall be required to obtain a certificate of public con- venience and necessity for such operation, in thfe manner pro- vided in section seven of Part III of chapter four hundred and sixty-three of the acts of the year nineteen hundred and six, which may be granted upon such terms and conditions as the commission may prescribe, including description of route, rate of speed, safeguarding passengers and persons using public ways and places, execution and delivery of a bond, with sureties satis- factory to the commission, providing security for the perform- ance of such terms and conditions and for the payment by such owner or operator of damages sustained by any person on account of such operation or of any fault or negligence in respect thereto. Section 2. This act shall take effect upon its passage. 2. An Act permitting Street Railway Companies to use Motor Vehicles. Be it enacted, etc., as follows: Section 1. Any street railway company, in addition to the business of a common carrier which it has heretofore been au- thorized to conduct, may, by the affirmative vote of two-thirds of (1 ■ ■! 66 REPORT ON STREET RAILWAYS. [Feb. 1918.] SENATE — No. 265. 67 C'. all its issued and outstanding capital stock, acquire, own, and operate motor vehicles (not running on rails or tracks) for the transportation therein for hire of persons and property. Any such company voting to exercise the authority conferred by this act shall, with respect to such exercise, be subject to the super- vision and control of the public service commission and to all the provisions of chapter seven hundred and eighty-four of the acts of the year nineteen hundred thirteen, in the same way and to the same extent as it is subject thereto with r.espect to the busi- ness it has heretofore been authorized to conduct. Section 2. This act shall take effect upon its passage. 3. An Act relating to Street Railway Companies as Common Carriers. Be it enacted, etc., as follows: Section 1. A street railway company upon the petition of any interested party may be authorized to become a common carrier of newspapers, baggage, express matter and freight in such cases, upon such parts of its railway and to such extent as the public service commission after public notice and a hearing shall determine that the public interests and convenience require. Any street railway company acting under authority so granted shall be subject to such regulations and restrictions as said com- mission from time to time may make, and shall be subject to the provisions of all laws now or hereafter in force relating to common carriers in so far as they shall be consistent herewith. The au- thority conferred upon any street railway company by virtue of the provisions of this act may be modified or revoked at any time by said commission if it shall determine upon investigation and after a public hearing that the public interests so require. Section 2. This act shall take effect upon its passage. An Act relative to the Taxation or Street Railway Companies and the Repair and Maintenance of Pubuc Ways and Places in which Street Railways are lo- cated. Be it enacted, etc., as follows: Section 1. Section seventy-nine of Part III of chapter four hundred and sixty-three of the acts of the year nineteen hundred and six is hereby amended by striking out all words in the first six lines and in the seventh line as far as, but not including, the word "open" and inserting in place thereof the words: — Every street railway company shall maintain in constant repair, to the satisfaction of the superintendent of streets, street commissioner, road commissioners or surveyors of highways, the paving, upper planking or other surface material, and the base thereof, of the portions of public ways and bridges occupied by its tracks; and if such tracks occupy unpaved public ways, shall in addition so maintain in constant repair eighteen inches on each side of the portion occupied by its tracks; but no street railway company shall be required to repave or make a general replacement or re- newal by virtue of this obligation to repair, nor by reason of any obligation which may have been imposed in any grant of loca- tion. As incident to its corporate franchise, and without being subject to the payment of any fee or to any other condition precedent, a street railway company may — by inserting after the word "material", where it occurs in the seventeenth and twenty- second lines, the words: — or the base thereof, — by inserting after the word "surface", in the thirty-first line, the words: — material, or the base thereof, — and by inserting at the end thereof the sentence: — The provisions of this section shall apply to the Boston Elevated Railway Company and to all railways owned, leased or operated by it, — so that said section, as amended, shall read as follows: Section 79. Every street railway company shall maintain in constant repair, to the satisfaction of the superintendent of streets, street commissioners, road commis- sioners or surveyors of highways, the paving, upper planking or other surface material, and the base thereof, of the portions of public ways and bridges occupied by its tracks; and if such tracks occupy unpaved public ways, shall in addition so maintain in constant repair eighteen inches on each side of the portion occupied by its tracks; but no street railway company shall be required to repave or make a general replacement or renewal by virtue of this obligation to repair, nor by reason of any obliga- tions which may have been imposed in any grant of location. As incident to its corporate franchise, and without being subject to the payment of any fee or to any other conditions precedent, a street railway company may open any street, highway or bridge in which any part of its railway is located, for the purpose of making repairs or renewals of the railway, or of any part thereof, and the superintendent of streets or other officer who exercises like authority, or the board of aldermen or selectmen shall issue the necessary permits therefor in a city or town in which such u 68 REPORT ON STREET RAILWAYS. [Feb. are required. If, during the original construction or subsequent alteration or extension or the making of any such repairs or re- newals of any railway or a portion thereof, said surface material or the base thereof is disturbed, the company which owns or operates such railway shall, at its own cost, except as provided in sections sixty-five and seventy-one, replace to the reasonable satisfaction of the superintendent of streets, or other officer who exercises like authority, said surface material or the base thereof with the same form of construction as that which was disturbed, or, by first obtaining the approval thereof by such ofiBcer, with a different material and form of construction, and shall restore said street, highway or bridge to as good condition as existed at the time of such disturbances. A street railway company shall be liable for any loss or injury which may be sustained by any person in the management and use of its tracks and during the construction, alteration, extension, repair or renewal (A its rail- way, or while replacing the surface material, or the base thereof, of any street which may have been disturbed as aforesaid, and which results from the carelessness, neglect or misconduct of its agents or servants who are engaged in the prosecution of such work, if notice of such loss or injury is given to the company and an action therefor is commenced in the manner provided by sec- tion twenty of chapter fifty-one of the Revised Laws. The pro- visions of this section shall not affect the obligations of any street railway company in respect of the construction or maintenance of any bridge or part thereof which any private person or corpora- tion may be liable, in whole or in part, to construct or maintain. The provisions of this section shall apply to the Boston Elevated Railway Company and to all railways owned, leased or operated by it. Section 2. On or before the first day of November, annually, the assessors of every city and town shall assess on every com- pany operating a street railway or electric railroad therein, in- cluding any company whose lines are located partly within and partly without the limits of the commonwealth, whether chartered or organized under the laws of this commonwealth or elsewhere, and including the Boston Elevated Railway Company, an excise tax of an amount equal to one half of the amount expended or in- curred for labor, during the twelve months ended upon the thirtieth day of the preceding September, by such city or town, or by the Massachusetts highway commission within the limits of such city or town, in repaving or in making a general replace- 1918.] SENATE — No. 265. 69 ment or renewal of the paving, upper planking or other surface material, or the base thereof, of the portions of public ways and bridges occupied by the tracks of said company. The Massa- chusetts highway commission is hereby directed to furnish, on or before the fifteenth day of October annually, a certificate to the assessors of any city or town, in such detail as may be necessary to enable the assessors to comply with the provisions of this sec- tion, showing the amounts expended or incurred for labor, as aforesaid, by said commission within the limits of such city or town. The excise tax provided by this section shall be in addi- tion to the taxes otherwise provided by law. Section 3. On or before the first day of November in each year the assessors of every city and town shall notify the collector of taxes thereof of the amount of the excise tax assessed therein under the provisions of section two, and the collector shall forth- with notify the treasurer of each street railway and electric rail- road company (including the Boston Elevated Railway Company) of the amount of excise tax so assessed upon it, which shall become due and payable within thirty days after the receipt of such notice, with interest after the first day of December. The provisions of Part II of chapter four hundred and ninety of the acts of the year nineteen hundred and nine, so far as appropriate, shall apply to the collection of such excise tax. Section 4. Within thirty days after receiving notice of the amount of the excise tax assessed upon it by the assessors of any city or town, any street railway or electric railroad company (including the Boston Elevated Railway Company) aggrieved thereby may appeal therefrom by filing a complaint with the clerk of the county commissioners for the county in which such city or town is situated, or of any board exercising the powers of such commissioners. If, upon a public hearing after due notice to such city or town, said county commissioners or said board shall find the amount of the excise tax assessed upon said com- pany to be in excess of the amount which should properly have been assessed under the provisions of section two, said county commissioners or said board shall make a reasonable abatement and an order as to costs. A company whose tax is thus abated shall be entitled to a certificate thereof from the board making such abatement, and, if the tax has been paid, shall be reimbursed by the city or town to the amount of the abatement allowed, with interest from the time of payment of said tax and all charges paid therewith. If no abatement is granted, said county tsf '*■'. ii' 70 REPORT ON STREET RAILWAYS. [Feb. commissioners or said board may allow the city or town its ex- penses and costs, to be paid by the company. Section 5. Section fifty-one of Part III of chapter four hun- dred and ninety of the acts of the year nineteen hundred and nine is hereby amended by striking out the words "of the preceding section", in the third line, so that the section as amended shall read as follows: — Section 61 , All taxes which are collected from a street railway or an electric railroad company and paid to a city or town under the provisions of section sixty-five, and of section twenty-eight of chapter five hundred and seventy-eight of the acts of the year eighteen hundred and ninety-eight, shall be applied in the case of street railway companies toward the repair and maintenance of the public ways and the removal of snow therefrom within such city or town, and in the case of electric railroad companies shall be applied toward the construction, re- pair and maintenance of the public ways and places in which the tracks of such company are located, and to the removal of snow from such public ways and places within such cities and towns. Section 6. Sections forty-seven to fifty, inclusive, of Part III of chapter four hundred and ninety of the acts of the year nine- teen hundred and nine, and all other acts and parts of acts in- consistent herewith, and any portion of chapter five hundred and seventy-eight of the acts of the year eighteen hundred and ninety-eight which might otherwise be held to prevent the appli- cation of this act to the Boston Elevated Railway Company or to any railways now owned, leased or operated by it, are hereby repealed. Section 7. This act shall take effect upon its passage. 6. An Act relative to the Alteration of Location of Tracks to provide for improved equipment. Be it enacted, etc., as follows: Section 1. Section sixty-five of Part III of chapter four hun- dred and sixty-three of the acts of the year nineteen hundred and six, as amended, is hereby further amended by adding at the end thereof the following: — If the board of aldermen or selectmen act adversely or fail to act within sixty days from the date of filing the petition by a street railway company requesting au- thority to alter the location of its tracks so that a more improved type of equipment may be used, in order to provide better 1918.] SENATE — No. 265. 71 service, the petitioner or any interested party may file such pe- tition with the public service commission, which shall, after public notice and a hearing determine whethfer public necessity and con- venience require the granting of such petition, and shall make an order dismissing such petition or requiring the street railway te make the necessary alteration in the location of its tracks, — so that the section will read as follows: — Section 65. The board of aldermen of a city or the selectmen of a town, upon the petition executed in accordance with by-laws or a vote of the directors of a street railway company whose tracks are located in said city or town, or upon the petition of any interested party, after public notice and a hearing as provided in section seven, may alter the location of the tracks in the manner prescribed in, and subject to the provisions of, the preceding section. Such alteration shall be made by such company within such time, and the expense thereof shall be borne by such party or parties and in such pro- portions as the board of aldermen or selectmen may determine. No such alteration of a location shall be valid until the board of railroad commissioners, after public notice and a hearing, shall certify that such alteration is consistent with the public interests. If said board requires an amendment to such alteration before certifying that the same is consistent with the public interests, said board shall notify the board of aldermen or selectmen of such amendment; and thereafter said board of aldermen or select- men may amend such alteration in accordance with the said amendment: provided, that, if such amendment involves a change in the route of the railway, public notice and a hearing shall be given as hereinbefore provided in the case of the original applica- tion for an alteration; and thereafter the board of railroad com- missioners may, as a part of the original proceedings before it, certify that such alteration so amended is consistent with the public interests. An alteration, so certified to be consistent with the public interests, shall be a valid location, if, within sixty days after the issue of notice of said certification to the company, it shall file a written acceptance of such alteration, executed in accordance with its by-laws or a vote of its directors, with the board of aldermen or selectmen. If the board of aldermen or selectmen act adversely or fail to act within sixty days from the date of filing the petition by a street railway company requesting authority to alter the location of its tracks so that a more im- proved type of equipment may be used, in order to provide better service, the petitioner or any interested party may file such pe- Kil II 72 REPORT ON STREET RAILWAYS. [Feb. tition with the public service commission, which shall, after public notice and a hearing determine whether public necessity and convenience require the granting of such petition, and shall make an order dismissing such petition or requiring the street railway to make the necessary alteration in the location of its tracks. Section 2. This act shall take effect upon its passage. e. An Act relative to the Alteration of Location of Street Railway Tracks in Highways. Be it enactedf etc., as follows: Section L Section sixty-five of Part III of chapter four hun- dred and sixty-three of the acts of the year nineteen hundred and six, as amended by section three of chapter four hundred and seventeen of the acts of the year nineteen hundred and nine, is hereby further amended by inserting after the word "determine", in the twelfth line, the following : — protidedf however, the expense of such alteration shall be borne by the street railway company only when made upon the petition of such company. Section 2. Part III of said chapter four hundred sixty-three of the acts of the year nineteen hundred and six is hereby amended by striking out section sixty-eight, and substituting the following: — Section 68. If a street or highway in which the tracks of a street railway company have been located for a period of five years is altered, or if the grade thereof is changed under the provisions of chapters forty-eight or fifty of the Revised Laws, the company shall not be required to bear any portion of the expense thereof. Section 3. Section seventy. Part III of said chapter four hundred and sixty-three, as amended by section four of chapter four hundred and seventeen of the acts of the year nineteen hun- dred and nine, is hereby further amended by striking out section seventy and substituting the following: — Section 70. If the board of aldermen of a city or the selectmen of a town and a street railway company having a location in a way which said aldermen or said selectmen or the county commissioners of the county in which said city or town lies have in writing requested the commonwealth to take charge of, make application to the Massachusetts highway commission, and with the application submit satisfactory plans, profiles and cross-sections of said way, 1918.] SENATE — No. 265. 73 the commission shall indicate on such plans, profiles, cross-sec- tions a location and grade for the tracks of said street railway company. If the commission considers said way suitable for a state highway, the commission shall pay, out of the appropria- tions for the construction and repair of state highways, the damages sustained by a person whose property may be injured by the construction of such state highway and the cost of grading the said way to the lines established by the Massachusetts high- way commission. A way which is graded under the provisions of this section shall remain a town way or a highway, subject to all laws relative thereto, until said way is taken charge of as a state highway by the commonwealth. Section 4. This act shall take effect upon its passage. 7. An Act relative to the Alteration or Construction of Bridges upon which Street Railway Tracks are located or are to be located. Be it enacted, etc., as follows: Section 1. Section twenty-three of Part I of chapter four hundred and sixty-three of the acts of the year nineteen hundred and six, as amended by section one of chapter five hundred and forty-two of the acts of the year nineteen hundred and eight, and by section one of chapter forty-seven of the acts of the year nineteen hundred and nine, is hereby further amended by striking out the last sentence thereof, and by striking out the words "rail- road commissioners" and substituting the words: — public service commission, — so that said section will read as follows: — Section 23. If a public way and a railroad cross each other, and the board of aldermen of the city or the selectmen of the town in which the crossing is situated, or the directors of the railroad cor- poration, or the directors of a street railway company having tracks on the said way are of opinion that it is necessary for the security or convenience of the public that an alteration which does not involve the abolition of a crossing at grade should be made in the crossing, the approaches thereto, the location of the railroad or way, or in a bridge at the crossing, they shall apply to the county commissioners, or, if the crossing is situated, in whole or in part, in the city of Boston, to the public service commission, who shall, after public notice, hear all parties interested, and if they decide that such alteration is necessary, shall prescribe the I ■-WSK3 if I ; 74 REPORT ON STREET RAILWAYS. [Feb. manner and limits within which it shall be made, and shall forth- with certify their decisidn to the parties and to said board. This proceeding may include any case where there is need of the re- building of a highway bridge or any structural change or renewal for the purpose of strengthening or improving it. Section 2. Section twenty-five of Part I of said chapter four hundred and sixty-three is hereby amended by striking out the words "the street railway company having tracks in said way", in the tenth and eleventh lines, and also the last sentence, so as to read as follows: — Section 25. A special commission of three disinterested persons, who shall be appointed as provided in the following section, shall determine which party shall carry such decision into effect and which party shall pay the charges and expenses of making such alteration and the future charges for keeping such bridge or crossing and the approaches thereto in repair, as well as the cost of the application to the county com- missioners, or the board of railroad commissioners and of the hearing before said special commission; and it may apportion all such charges, expenses and costs between the railroad corpora- tion and the counties, cities or towns in which said crossing is situated and other cities and towns which may be specially bene- fited. Section 3. This act shall take effect upon its passage. 8a. An Act relative to Street Railway Service at Cost. Be it enacted f etc., as follaws: Section 1. Any company operating a street railway, as de- fined in section one of Part III of chapter four hundred sixty- three of the acts of the year nineteen hundred and six, whether organized under general or special law, may accept the provisions of this act in the manner hereinafter provided. Any street rail- way company which shall so accept the provisions of this act shall after the determination of the investment value of its prop- erty as hereinafter provided furnish transportation at cost. Cost shall include all operating expenses, taxes, rentals, provision for depreciation to be fixed by the commission, and an interest re- turn upon the investment value of the property as hereinafter provided. Section 2. In determining the investment value of the prop- erty of an accepting company (hereinafter called the company) 1918.] SENATE — No. 265. 75 the public service commission (hereinafter called the commission) shall include the following items: — (a) The cash actually paid to the company for issues of its stock, bonds and other obligations which have been approved by the commission or by the board of railroad commissioners. (6) The face or par value of its stock, bonds and other obliga- tions issued for property where the commission or the board of railroad commissioners have determined that the value of such property is equal to the par or face value of the securities issued therefor. (c) In cases where issues of stock or of bonds or other obliga- tions payable at periods of more than twelve months after the date thereof have not been approved by the commission or by the board of railroad commissioners, or the same have been issued for property without any determination by the commission or by the board of railroad commissioners that the value of such property is equal to the par or face value of the securities issued therefor, such amount as the commission shall determine to repre- sent the fair cost of such property to the extent that the same is within the commonwealth, or when cash was paid the amount of cash actually received by the company for such securities. Section 3. In case the company has leased the entire prop- erty of another company, and the operation of the two companies or their financial affairs have become so clearly associated that in the opinion of the commission it would be convenient or ad- visable to regard the said properties as a unit, the commission may include the properties of the lessor company in the invest- ment value of the property of the lessee company; but in such case the rent paid by the lessee to the lessor shall not be included in operating expense, but shall be paid by the lessee company from its interest return. Section 4. If the investment value of the property of a com- pany has been determined within three years of the date of the passage of this act, the amount so determined, with the addition of amounts subsequently expended as found by the commission, shall be deemed the investment value. Section 5. If upon the determination of the investment value of the company's property by the commission it appears that the company has not during any year in the five fiscal years of such company preceding such determination reported to the commis- sion or the board of railroad commissioners an operating income of at least four per cent upon such investment value, such com- i 76 REPORT ON STREET RAILWAYS. [Feb. pany shall be excluded from the operation of this act, and its acceptance thereof shall be void and of no effect, and no further proceedings shall be had hereunder: provided, however, that such company by a vote of not less than a majority of its stockholders entitled to vote may elect to accept a reduced investment value of not more than the amount upon which it has so reported an operating income of four per cent, and upon such vote it shall be included in the operation of this act. Section 6. The investment value of the property of the com- pany shall be increased from time to time by the following items: — (a) The face or par value of stock, bonds and other obligations issued for property and with the approval of the commission. (b) Cash received by the company in respect to issues of its stock, bonds and other obligations which have been approved by the commission. (c) Any portion of the interest return which the company may expend for additions or improvements. Section 7. If the company is dissatisfied with the determina- tion by the commission of the investment value of its property it may appeal to the supreme judicial court from the determina- tion of the commission. Until the final adjudication of such appeal the investment value shall be the amount determined by the commission: provided, however, that if the supreme judicial court shall find an investment value in excess of the amount de- termined by the commission the company shall be entitled to re- ceive the interest return on such additional amount from the date of its acceptance of the provisions of this act. Section 8. A company shall forthwith, upon the determina- tion by the commission of the investment value of its property, provide for itself a reserve fund which shall not be less than three per cent nor more than six per cent of such investment value. The reserve fund shall be available as an equalizing fund to pro- vide for unexpected or unusual contingencies in the business, due to seasonal or other changes temporarily affecting its revenues. To provide the reserve fund the company, notwithstanding any provision of this act or any restrictions imposed by the laws now in force, may issue such stock, bonds or other obligations as the commission may approve. The subscribers to the reserve fund shall pay twenty-five per cent of their subscription upon accept- ance of the act by the company, and the balance may be paid as follows: twenty-five per cent four months, twenty per cent eight 1918.] SENATE — No. 265. 77 months, twenty per cent fifteen months, and ten per cent eight- een months thereafter. When paid in full not less than seventy per cent of the reserve fund shall be invested in bonds of the United States government, and the uninvested balance shall be deposited in a special bank account to be known as the reserve fund account. If at the end of any calendar year the investment value of the properties of the company shall be increased the company shall forthwith proportionately increase its reserve fund so that the amount originally contributed, with any subsequent additions from sources other than earnings, shall not be less than three per cent of the investment value of its properties. Section 9. The company shall provide by the issue of securi- ties an improvement fund to an amount required by the commis- sion but not exceeding the reserve fund. This improvement fund shall be fully subscribed within sixty days after determination of the investment value of the property of the company, and shall be paid in from time to time as required by a plan of gradual improvement to be submitted to and approved by the commis- sion. Section 10. The company shall establish a depreciation re- serve and shall pay into it from time to time such sums as the commission shall direct, to the end that adequate replacements and renewals shall be made from time to time. Section 11. The company shall also establish an accident re- serve, and shall pay into it from time to time such sums as the commission shall direct. The funds deposited in this reserve shall be used to pay unusual expenses incident to losses suffered by the company on account of persons killed or injured. Section 12. The company shall be entitled to receive each month an interest return of one-half of one per cent of the in- vestment value of its properties. If the company at any time finds that the interest return above provided for is insufficient to enable it to procure additional funds by the sale of its securities, it may apply to the commission, which may permit the company to increase its interest return, and shall also determine for what length of time the increase interest return shall be in force. Section 13. The accounts of the company shall be kept in such manner as the commission shall from time to time direct, provided that its operating revenues from whatever source de- rived shall be used for the purposes and in the following order: — First. — To pay or provide for the payment of all operating ex- penses, taxes, rentals, depreciation, and accident reserves and 78 REPORT ON STREET RAILWAYS. [Feb. other costs properly chargeable against income or surplus under the present accounting system of the interstate commerce com- mission or such account system as may be approved by the public service commission. Second. — To set apart each month for the use of the company an interest return of not less than one half of one per cent of the investment value of its properties. Third. — To pay the balance into the reserve fund of the com- pany. Section 14. If in any month the operating revenues of the company are insufficient to meet the operating costs and the interest return to the company, as provided in section eleven hereof, the company may appropriate from the reserve fund an amount sufficient to meet the deficiency, and within five days shall report the fact to the commission. Section 15. On or before the twenty-fifth of each month the company shall file with the commission a statement for the calendar month next preceding, showing — (a) The amount of operating revenues from whatever source derived. (6) The amount paid out and applied under each of the sub- divisions of section twelve hereof, and the amount on deposit in the accident reserve and in the depreciation reserve. (c) The amount, if any, paid by the company into the reserve fund. (d) The amount, if any, appropriated by the company from the reserve fund to meet the deficiency in the amount of return to which it is entitled or in the payments which it is required to make. (e) The amount of reserve fund. Section 16. Immediately upon the acceptance of this act the company shall file with the commission a rate schedule which shall provide for eight grades of fare and transfer privileges, four of which will produce a gradual increase and four of which will produce a gradual decrease in its present operating revenues, and the commission within sixty days thereafter shall approve the said schedule or shall make such changes therein as it finds ad- visable. All changes of fare made or required to be made by the company, in the manner hereinafter provided, shall be in accord- ance with the said rate schedule. The company whenever any change of fare is made shall, with the approval of the commission, establish and add to its rate schedule additional grades of fare, so 1918.] SENATE — No. 265. 79 that the said schedule will at all times provide four successive grades for the respective increase and decrease of the operating revenues of the company. If at any time it shall appear in the interest of the public or of the company that the said schedule should be changed either with regard to the method or basis upon which the fares and transfer privileges are established, or because the steps between the different grades are too small or too great, or for any other reason, the company and the commission may by agreement change the said schedule. Section 17. It shall be the duty of the commission to see to it that the operating revenues of the company shall be adequate to maintain the reserve fund at about its original or normal amount, and with due regard to the uses of the fund as stated ift section seven hereof it shall be its duty to require the company to put in force from time to time such grade of fares as in its opinion will be adequate to maintain the reserve fund at about its normal amount. The company shall, however, without any authorization or requirement of the commission, immediately put in force the next succeeding lower grade of fare as shown on its rate schedule if at the end of any fiscal year its reserve fund shall be increased to fifty per cent in excess of its original or normal amount, and if after operating six months under such lower grade of fare the reserve fund shall then exceed its original or normal amount by more than twenty per cent then the fares of the com- pany shall again be reduced to the next succeeding lower grade in the rate schedule herein provided for. A further reduction shall thereafter be made at intervals of six months by steps each to the next lower grade of fare until the reserve fund shall amount to less than ten per cent in excess of its original or normal amount. If at the end of ninety days from the acceptance of this act the reserve fund of any company shall have been reduced to eighty-five per cent of its normal amount, the company shall without any authorization or requirement immediately adopt the next higher grade of fare. The company shall also without any authorization or requirement of the commission immediately adopt the next succeeding higher grade of fare as shown on its rate schedule if and whenever its reserve fund shall be reduced to fifty per cent of its original or normal amount, and if at the end of three months after such increase said reserve fund is less than seventy per cent of its original or normal amount the company shall again increase its fares from the grade then in force to the next higher grade in the said rate schedule, and shall continue to I! 1:1 ,t 1 1 iki m m m III III 80 REPORT ON STREET RAILWAYS. [Feb. increase its fares by steps from the grade then in force to the next higher grade in the said schedule at intervals of not less than three months, until such reserve fund equals ninety per cent of its original or normal amount. Section 18. The properties of the company shall be operated subject to the supervision of the commission, which may require such changes in service, management, operating conditions and otherwise as may in its opinion be necessary for the efficient con- duct of the business of the company in the interest of the public. When any difference shall arise between the company and the commission in regard to carrying out the provision of this section, and the company and the commission are unable to agree, the matter in dispute shall be determined by arbitration by three dis- interested persons, one appointed by the commission, one by the company, and the third by the chief justice of the supreme judicial court. Section 19. The company shall be bound to sell to the com- monwealth or any political subdivision thereof at any time its entire property at its then existing investment value as de- termined under the provisions of this act. The purchaser shall assume all leases, contracts, etc., and the payment of all valid obligations. This provision shall not preclude the commonwealth from acquiring any street railway at a less price by purchase or otherwise under the provisions of existing or future laws. Section 20. The company may issue its stock, bonds and other obligations with the approval of the commission in the manner now provided by law, and sell the same at prices to be approved by the commission, which prices may be below their par value, and may hereafter from time to time with the approval of the commission as aforesaid issue bonds to an amount which when added to the amount of its indebtedness then outstanding shall not cause the aggregate amount of its bonded indebtedness to exceed by more than fifty per cent the amount of its capital stock actually paid in at the time plus premiums and deducting discounts on stock sold. Section 21. The governor, with the consent of the council, shall appoint for a term of three years a director to the board of directors of the company, to be known as the state director, who shall be a resident of a city or town served by such company, but shall not be an owner of its stock or bonds. The by-laws of the company shall provide for monthly meetings of the board of directors. 1918.1 SENATE — No. 265. 81 Section 22. The commonwealth shall be divided into ten street railway districts, and for each district the commission shall appoint a resident deputy commission for a term of three years, his salary and expense allowance to be fixed by the commission and paid by the commonwealth. It shall be his duty to keep in constant touch with the operation of the company and with the communities served thereby, and to inform the commission of all complaints and criticisms of the service rendered in order that the commission may at all times be in a position to take such action, if any, as may be required in the public interest. Section 23. The commission shall employ two examiners ex- perienced in the street railway business, their salaries and expense allowance to be fixed by the commission and paid by the com- panies. It shall be the duty of the examiners to supply the com- mission with information as to the condition and operating efficiency of the company and to suggest such changes therein as may seem to them necessary and advisable. Section 24. This act may be accepted by a company by vote of not less than a majority of all its stock outstanding and en- titled to vote, at a special meeting of its stockholders duly called for the purpose. A copy of such vote shall be filed with the secre.- tarv of the commonwealth and with the commission. No pro- vision of any general or special law establishing a fixed rate of fare shall be thereafter applicable to any such company. Section 25. Whenever after the date of the passage of this act any bonds or other obligations have been issued by a com- pany which has accepted the same, the provisions of the act shall not be changed so as to diminish the interest return on the in- vestment value of its property as provided herein so long as any of such bonds or other obligations remain outstanding. 8b. An Act to provide Street Railway Service at Cost. Be it enacted, etc., as JoUows: Section 1. Any street railway company which accepts this act as provided in section thirteen shall thereafter furnish service to the public at cost, and shall thereafter be subject to the provisions of this act with reference to the matters specified herein, but in all other respects shall be subject to the general laws relating to street railway companies. Section 2. The cost of the service shall include operating ex- penses, taxes, rentals, interest on all indebtedness not included in i i!i 1!! i (■• 82 REPORT ON STREET RAILWAYS. [Feb. invested capital, such allowances for depreciation, obsolescence and losses in respect of sold, destroyed or abandoned property as may be fixed in the case of each company by the public service commission, and all other expenditures and charges which under the classification of accounts of the interstate commerce commis- sion and under the laws of the commonwealth are properly chargeable against income or surplus. The cost of the service shall also include interest at the rate of six per cent per annum on the capital invested: provided, however, that if the public service commission is of opinion at any time that a higher return upon the capital invested is necessary in order to enable the com- pany to secure additional capital it may upon the application of the company fix such rate of return and also the length of time for which it shall be in force. Section 3. The words "invested capital" or "capital actually invested" as used in this act shall mean the aggregate of the fol- lowing items: — (a) Cash actually paid into the company for stock and bonds issued for capital purposes with the approval of the public service commission or its predecessor, the railroad commission. (6) The face or par value of stock or bonds issued for capital purposes or paid for in property where the public service commis- sion or its predecessor, the railroad commission, after the issue of such stock or bonds, determined that the then value of the prop- erty of the company was equal to the face value of its capital stock and its indebtedness. (c) In all cases other than those provided for in subsections (a) and (6), the actual cash paid in or actual cash value of prop- erty paid in for stock or bonds issued for capital purposes where such issue was not approved by the public service commission, or its predecessor, the railroad commission, the amount of such cash so paid in or the cash value of the property so paid in to be de- termined by the public service commission upon the application of the company: provided, however, that if the amount of cash so paid in or the cash value of the property so paid in shall have heretofore been determined in any other proceeding by the public service commission or its predecessor, no further determination shall be necessary. (d) Stock or bonds issued to provide the reserve fund herein- after mentioned shall be deemed to have been issued for capital purposes. In the case of consolidation of two or more companies or the 1918.] SENATE — No. 265. 83 purchase of all the property and franchises of one company by another, the invested capital of the consolidated company shall be deemed to be the aggregate amount of the invested capital of the companies consolidated, and in the case of purchase the bonds and stocks issued or assumed in payment for the properties and franchises purchased shall be taken at an amount equal to the invested capital of the selling company as herein defined. Section 4. No company shall accept this act until it has pro- vided a reserve fund of not less than four per cent nor more than eight per cent of the par value of its outstanding capital stock, but in no event to exceed one million dollars. Such reserve fund may be provided by the issue of either stock or bonds, and the company may, with the consent of not less than two thirds of its stockholders present and voting at any meeting, issue preferred stock for the purpose, carrying such rate of dividend and having such rights and preferences as the stockholders may deem neces- sary and as may be approved by the public service commission. The reserve fund shall at all times be kept separate and dis- tinct, and shall be used only for the purpose of making up a deficiency of income where the income of the company is insuffi- cient to pay the cost of the service. Until it is so used, it may be invested in government bonds or such other securities as may be approved by the public service commission. Section 5. Whenever the income of the company is insuffi- cient to meet the cost of the service as defined in section two, there shall be transferred from the reserve fund an amount sufficient to make up such deficiency, and if, on the other hand, such income is more than sufficient to meet the cost of the service, the excess shall be transferred to and added to the amount of the reserve fund. The company shall, on or before the twenty-fifth day of each month, file with the commission a statement in such form and in such detail as the commission may require, showing its income and expenditures during the preceding month, and the pro rata amount set aside on account of taxes, depreciation, interest on in- vested capital and any other periodical charges. The commission may object to any expenditure or charge as unreasonable, un- lawful or improper made or to be made by the company in con- nection with the maintenance and operation of its property. If the objection by the commission refers to an expenditure already made, the company forthwith upon receipt of notice shall remove the amount from the account or accounts to which it had been II ^ 84 REPORT ON STREET RAILWAYS. [Feb. charged, and hold the same in a suspense account until the amount in dispute is adjudicated. If the objection refers to an expenditure to be made, the company, if it makes such expendi- ture, shall charge to and carry the same in a suspense account until the item in dispute is adjudicated. In case the commission and the company are unable within ten days, Saturdays, Sundays and legal holidays excepted, after the delivery of such notice, to agree upon the reasonableness and propriety of such expenditure or charge, the same shall be determined by arbitration as pro- vided in section six hereof. Any contract, agreement or undertaking having to do with the maintenance and operation of the company's property extending beyond a period of one year, or involving an expenditure of over five per cent of the reserve fund (or any agreement, contract, or undertaking having to. do with the maintenance and operation of the company's property which the company shall desire to make, subject to the approval of the commission), shall be entered into by the company subject to the approval of the commission. Any payments made under any such contract approved by the com- mission shall not be subject to objection hereunder unless the payments thereunder shall not be in accordance with the terms of such contract. Upon submission of any such agreement, contract or undertak- ing to the commission, they shall either approve or disapprove the same within thirty days thereafter. Section 6. If the company or the commission are unable to agree as to any expenditure or charge as provided in the preced- ing section, either the commission or the company may within ten days thereafter notify the other of its desire to submit the dispute to arbitration, and in such notification shall name one arbitrator. Within ten days after the receipt of such notice the other party shall name a second arbitrator, and the two arbitra- tors so chosen shall thereupon within ten days, if possible, agree upon a third arbitrator, but if they are unable so to agree, the third arbitrator shall be appointed on the application of either party either by the governor of the commonwealth or by the chief justice of the superior court. If it is agreed by the commission and the company or deter- mined by arbitration that the Expenditure or charge so objected to, or any part thereof, is reasonable and proper, the amount so agreed upon or determined shall be charged to the cost of the service. In so far as all or any part of such expenditure or charge 1918.] SENATE — No. 265. 85 may be disallowed as unreasonable or improper, the amount so disallowed shall be borne by the company. It shall be the duty of the commission in case of objection to any expenditure or charge to give notice thereof to the company within thirty days after the commission has become cognizant of such expenditure or charge; but any failure on the part of the commission to give such notice within thirty days shall not ex- cuse the company from complying with the provisions hereof in respect to the money to be held in suspense, but such delay may be set up by the company as a defense to the disallowance thereof. Section 7. When any company accepts this act, it shall file with such acceptance a schedule of eight different grades of fares of which four shall be below its existing rate of fare and four above, and the public service commission shall, within sixty days thereafter, either approve the schedule so filed, or establish eight other grades of fare in place thereof, and the commission shall at the same time designate which of the rates of fare so established shall thereafter be in force as being in the opinion of the com- mission that rate of fare which will enable the company to earn an income sufficient to meet the cost of the service. Whenever by reason of any change in the existing rate of fare there are less than four grades either above or below any new rate of fare es- tablished, the company shall forthwith file with the commission a schedule of such additional grades of fare as may be necessary, so that there shall always be not less than four above and four be- low the existing rate of fare, and the commission shall thereupon, within sixty days thereafter, either approve the schedule so filed or itself establish in lieu thereof the necessary additional- grades of fare. In fixing the different grades of fare the differences between the same shall be such as to effect either an increase or decrease in the annual revenue of the company, in the opinion of the public service commission, of not less than thirty per cent of the reserve fund. If at any time it shall appear in the interest of the public or of the company that the said schedule should be changed either with regard to the method or basis upon which the fares and transfer privileges are established, or because the steps between the different grades are too small or too great, or for any other reason, the company and the commission may by agreement change the said schedule. ... ^A^ iJf-. ■ o£.ta,-°\.'|%^k-, ■« |Mji*- gdT '^■'^ittn— ''^ ' 86 REPORT ON STREET RAILWAYS. [Feb. The different grades of fare may include not only variations in the cash fare, but also provisions for sale of tickets at reduced rates, charging for or elimination of transfers, the establishment in whole or in part of the zone system, so called, or the variation of fare limits. Section 8. If, as of June thirtieth or December thirty-first in any year, the amount of the reserve fund shall exceed by thirty per cent the amount originally established, the company shall on the following September first or March first put into effect the next lower grade of fare, and if, as of such June thirtieth or December thirty-first, the reserve fund shall be less than seventy per cent of the amount originally established, the company shall on the following September first or March first put into effect the next higher grade of fare, and on the first days of September and March in each year the grade of fare shall be decreased or shall be increased, as the case may be, if the amount of the reserve fund is above or below the above limits, as of the preceding June thirtieth or December thirty-first. Section 9. Every company intending to accept this act shall, prior to such acceptance and as a condition thereof, provide by the issue and sale of additional bonds or capital stock an amount not less than per cent of the par value of its then outstanding stock, which amount shall be used from time to time with the approval of the public service commission to pay for additions and improvements to its property. Subscriptions to such additional bonds or stock may be made payable in such in- stalments and at such times as the board of directors of the com- pany may determine. Section 10. Any company accepting this act shall be bound by the fact of such acceptance to sell its entire property and franchises as a going concern to the commonwealth or to any political subdivision thereof at any time for an amount in cash equal to the capital invested as defined in section three hereof, and the purchaser shall in addition assume all the outstanding contracts, leases and other liabilities of the company other than stock and bonds issued for capital purposes. Section 11. The governor with the consent of the council shall appoint for a term of three years one of the directors of the board of directors of any company accepting this act, to be known as the state director. He shall be a resident of a city or town served by such company, but shall not be an owner of its stock or bonds. The by-laws of the company shall be modified 1918.] SENATE — No. 265. 87 so as to permit of the appointment of such director, and shall also provide for monthly meetings of the board. Section 12. Upon the acceptance of this act by any com- pany, the governor may, upon the application of the public service commission, appoint a deputy commissioner for a term of three years, whose duty it shall be to keep in constant touch with the operation of the company^s properties and the character and extent of the service. Such deputy commissioner shall be in all respects subject to the control and direction of the public service commission, and shall keep them fully informed as to all matters which require any action by the commission. The salary of the deputy commissioner and his expenses as allowed by the commission shall be paid by the company, or, if his duties extend to more than one company, they shall be apportioned between the several companies in respect to which he acts in such manner as the commission may determine. Section 13. Any company desiring to accept the provisions of this act may apply to the public service commission to determine the amount of its invested capital, and upon such determination such company may accept this act by filing with the public service commission its election so to do authorized by a vote of not less than the holdings of a majority of its capital stock and (a) evidence satisfactory to the compiission that it has or will provide the reserve fund mentioned in section four hereof; and (6) evidence satisfactory to the commission that it has or will provide the additional money by the issue of additional bonds or stock referred to in section nine hereof. Upon the filing of such acceptance it shall be the duty of the commission to de- termine from time to time the amount which the company shall set aside or expend for depreciation, obsolescence or for taking care of losses occasioned by sold, destroyed or abandoned prop- erty. Section 14. Whenever any company has accepted this act and has issued stock or bonds since such acceptance or as a con- dition of such acceptance, the provisions of this act shall not be changed so as to diminish the interest return on the invested capital so long as any of such bonds or stock remain outstanding. I HP"^ 88 REPORT ON STREET RAILWAYS. 8c. [Feb. An Act relative to the Rates, Charges and Service of Street Railway Companies and their Supervision by THE Public Service Commission. Be it enacted f etc., as follows: Section 1. With the approval of the public service commis- sion, and upon such terms and conditions as said commission, after notice and a public hearing, shall determine to be just and reasonable and consistent with the public interest, a street rail- way company may establish a sliding scale of rates and charges for the transportation of passengers upon its railway, subject to automatic adjustment in relation to the income balance of said company in any given period after paying all operating expenses and other charges against income, including such provision for de- preciation and reserve funds as the commission shall specify. So far as consistent with the automatic adjustment of rates and charges provided for therein, any such sliding scale shall be subject to the provisions of section twenty of chapter seven hun- dred and eighty-four of the acts of the year nineteen hundred and thirteen, and of section twenty-one of said chapter, as amended by chapter twenty-four of the acts of the year nineteen hundred and sixteen. Section 2. In its action relative to any sliding scale of rates and charges which a street railway company may seek to estab- lish under the provisions of section one, the public service com- mission shall be guided by the desirability of insuring such a re- turn upon capital invested honestly and prudently and conserved with reasonable care and diligence as will encourage the invest- ment of additional capital in needed extensions and improve- ments to street railway properties in this commonwealth. Among other terms and conditions, the commission may require the com- pany to provide, either by the issue of stock or bonds or other- wise, a special reserve fund which may be drawn upon for the payment of dividends under such circumstances and subject to such regulations as the commission shall specify. Before ap- proving any such sliding scale of rates and charges, the public service commission may further, to the extent that it deems the public interest demands, determine upon a program for the gradual rehabilitation, improvement or extension of the property of the company and reasonably assure itself that such program will be undertaken and carried into effect. 1918.] SENATE - No. 265. 89 Section 3. The public service commission shall establish a special department, to be known as the street railway depart- ment, whose duty it shall be to furnish the commission with in- formation relative to the physical condition, service, manage- ment and operating efficiency of the street railway companies under its supervision. If, at any time, the commission receives evidence from this department that laxity, carelessness, ineffi- ciency or wastefulness in the conduct of the affairs of a company which has been permitted to establish a sliding scale of rates and charges under the provisions of this act is seriously affecting its income balance, the commission shall at once inform the company of such evidence and of the date of a public hearing at which both the department and the company shall be heard. After such hearing, if the commission finds that changes in the conduct of the affairs of the company are desirable in the public interest, it shall notify the company in writing of such changes and of the time within which they should reasonably be made. If, at the expiration of such time, the commission has not received evidence that the changes thus specified have been made, it shall have power forthwith to annul, supersede or modify the sliding scale of rates and charges of said company to the extent which the commission deems necessary for the protection of the public interest. Except as thus provided, the public service commission shall have power to annul, supersede or modify a sliding scale of rates and charges established under the provisions of this act only after a public hearing and, unless the company consents, only during a period of sixty days after the expiration of each successive period of five years subsequent to such establishment. Section 4. In addition to the purposes for which a street railway company may increase its capital stock or issue bonds, as provided in section one hundred and three of Part III of chapter four hundred and sixty-three of the acts of the year nineteen hundred and six, a street railway company may, with the ap- proval of the public service commission, and subject (except as herein otherwise provided) to the provisions of all general laws relative to such increase or issue now or hereafter in force, in- crease its capital stock or issue bonds, secured by mortgage or otherwise, for the purpose of providing any special reserve fund for the payment of dividends which the commission may require under the provisions of this act, and that portion of section one hundred and eight of Part III of chapter four hundred and sixty- three of the acts of the year nineteen hundred and six which limits the amount of bonds, coupon notes or other evidences of I f 90 REPORT ON STREET RAILWAYS. [Feb. 11 I indebtedness payable at periods of more than twelve months after the date thereof which a street railway company may issue shall not apply to bonds issued for such purpose. Section 5. In addition to the amount appropriated by the general court, the public service commission may annually ex- pend, in the performance of its duties under this act, an amount not exceeding two per cent of the amount expended and charged to operating expense in the last preceding calendar year for superintendence and salaries and expenses of general officers and general office clerks by the street railway companies under its supervision. Within thirty days after this act takes effect, and on or before the first day of April in each succeeding year, the public service commission shall submit to the tax commissioner a statement of the amount required for this purpose, and within ninety days thereafter the tax commissioner shall assess upon each of said street railway companies its share of- such amount in proportion to its operating revenue for the last preceding year; and such assessment shall be collected in the same manner as taxes upon corporations. Of the amount so assessed and col- lected, any balance remaining on the thirtieth day of November in any year shall be carried forward to the next year, and shall be taken into account by the public service commission in de- termining the total amount required for that year. Section 6. This act shall take effect upon its passage. 8d. An Act to provide Street Railway Service at Cost. Be it enacted f etc., as follows: Section 1. Any street railway company whose rates and charges are now or shall hereafter be regulated and prescribed by the public service commission under general law may accept the provisions of this act in the manner hereinafter provided. Any such company which shall so accept the provisions of this act shall thereafter furnish service to the public at cost, and shall thereafter be subject to the provisions of this act with reference to the matters specified herein, but in all other respects shall be subject to the general laws relating to street railway companies, including those relative to the character and extent of the service to be rendered. Section 2. The words "invested capital" as used herein shall mean the amount of cash or property paid in for capital stock and bonds from time to time outstanding which have been issued 1918.] SENATE — No. 265. 91 for capital purposes, and the term "bonds" shall include bonds assumed by any company, as well as those issued by it. The words "stock investment" as used herein shall mean the amount of invested capital less the face or par value of bonds from time to time outstanding. The words "the company" as used herein shall mean any street railway company which has accepted the provisions of this act as herein provided. The words "the com- mission" shall mean the public service commission or its prede- cessor, the board of railroad commissioners. Section 3. The cost of the service shall include operating ex- penses, taxes, rentals, interest on indebtedness as hereinafter de- fined, and such allowances for depreciation and for operating re- serve funds as may be fixed in the case of each company by the commission, and all expenditures and charges which under the classification of accounts of the interstate commerce commission and under the laws of the commonwealth are properly chargeable against income or surplus. The cost of the service shall also in- clude a return upon the stock investment at such rate, not less than six per cent nor more than eight per cent, as the public service commission may, in view of the history, circumstances and conditions of the company, deem just and reasonable and necessary to encourage the investment of additional capital in needed extensions and improvements of its property. The rate of return determined by the commission from time to time, within the limits above prescribed, may be modified by the commission after a public hearing upon the application of the company or any interested party or upon the motion of the commission. Section 4. The amount of the invested capital shall be the aggregate of the items specified in paragraphs (a) (b) and (c) less any amount which may be deducted under the provisions of paragraph (d) of this section. (a) Cash actually paid in to the company for stock and bonds issued for capital purposes where the public service commission or its predecessor, the board of railroad commissioners, has deter- mined that the amount properly expended or required for the purposes set out in the company's petition is equal to the amount of cash so paid, and has approved the issue of such stock or bonds. (6) The face or par value of stock and bonds issued for prop- erty when the commission has, subsequent to the issue of such stock or bonds, determined that the then value of the company's property equalled or exceeded the face value of its capital stock and indebtedness. ^1 ii 92 REPORT ON STREET RAILWAYS. [Feb. (c) In cases other than those specified in paragraphs (a) and (h) the amount of cash or fair value of the property paid in for stock and bonds and honestly and prudently expended or ac- quired for capital purposes, the amount of cash or fair value of the property to be determined by the commission upon the ap- plication of the company: provided^ however, that if the amount of cash or the fair value of the property so paid in has heretofore been determined by the commission no further determination shall be necessary. (d) From the aggregate of items (a) (6) and (c) shall be de- ducted the amount of the actual cost or cash value of the prop- erty sold, leased or abandoned or not used or useful for street railway purposes, and the amount by which the original invest- ment has been reduced or impaired through the failure of the company to conserve the same with reasonable care and diligence prior to the acceptance of this act, such amounts to be deter- mined by the commission: provided, however, that in lieu of the deduction of such amounts or any part thereof the commission may by agreement with the company fix a lower rate of return on the stock investment than the minimum prescribed in section three, until the loss or impairment of capital is made good out of the net earnings of the company. In case a company has reduced its capital stock or debt the in- vested capital shall not exceed the outstanding stock and debt of such company. In the case of consolidation of two or more com- panies, or the purchase of all the property and franchises of one company by another, the invested capital of the consolidated company at the date of such consolidation shall be deemed to be the aggregate amount of the invested capital of the companies consolidated, and in the case of purchase of bonds and stocks issued or assumed in payment for the properties and franchises purchased, shall be taken at an amount equal to the invested capital of the selling company as herein defined. Stock or bonds issued to provide the reserve fund hereinafter mentioned shall be deemed to have been issued for capital purposes. Section 5. Any company desiring to accept, or which has ac- cepted, this act, as provided in section fifteen, shall at the time of its application to the commission to determine the amount of its then invested capital, or within six months after the date of its acceptance of this act, apply to the commission to determine the status of its then unfunded debt. The commission shall thereupon determine the amount thereof which represents ex- penditures properly incurred for capital purposes and the amount 1918.] SENATE — No. 265. 93 thereof which represents deficits of operation which are not due to the payment of yearly returns upon the stock investment in excess of an average rate of six per cent, or otherwise attributable to mismanagement. The commission shall have broad discretion to determine the last-named amount from such evidence as is available, and with due regard to existing equities as between in- vestors in and patrons of the company. The commission may also make provision for the gradual retirement of this amount by charges to operating expense to be included as a part of the cost of the service whenever, in the judgment of the commission, this may be done without increasing the rates of fare then in effect. Interest charges on both of said amounts, in addition to interest charges upon the company's bonded indebtedness, shall be in- cluded in the cost of the service. Interest charges upon the residue of the unfunded debt, not included in either of the said amounts, shall be borne by the company and charged to the amount which would otherwise be available as a return upon the stock investment in accordance with the provisions of section three. In case any company fails to make an application for the determination of the status of its unfunded debt, as provided in this section, all interest charges upon its unfunded debt outstand- ing at the date of the acceptance of this act shall be borne by the company. Where the interest on the unfunded debt or any portion thereof must, under the provision of this section, be borne by the company, the commission may, in its discretion, provide for the gradual retirement of such unfunded debt or portion thereof by charges to the amount which would otherwise be available as a return upon the stock investment, in so far as this may, in the opinion of the commission, be feasible without reducing the rate of return upon the stock investment provided for in section three. Interest charges upon the unfunded debt in- curred by the company after its acceptance of this act shall be included in the cost of the service until such time as the commis- sion disallows any portion of such debt as unreasonable or im- proper. All interest charges upon the portion so disallowed shall thereafter be borne by the company. Section 6. No company shall accept this act until it has pro- vided a reserve fund of not less than four per cent nor more than eight per cent of the par value of its outstanding capital stock, but in no event to exceed one million dollars. Such reserve fund may be provided by the issue of either stock or bonds, and the company may, with the consent of not less than two thirds of its M .1 94 REPORT ON STREET RAILWAYS. [Feb. stockholders present and voting at any meeting issue preferred stock for the purpose, carrying such rate of dividend and having such rights and preference as the stockholders may deem neces- sary and as may be approved by the public service commission. Section 7. Whenever the income of the company is insuffi- cient to meet the cost of the service as defined in section three, there shall be transferred from the reserve fund an amount suffi- cient to make up such deficiency, and if, on the other hand, such mcorae is more than sufficient to meet the cost of the service, the excess shall be transferred to and added to the amount of the reserve fund. The company shall, on or before the twenty-fifth day of each month, file with the commission a statement in such form and in such detail as the commission may require, showing all contracts, agreements or undertakings having to do with the maintenance and operation of the company's property extending beyond a period of one year or involving an expenditure of over five per cent of the amount of the reserve fund as originally established. Its income and expenditures during the preceding month and the pro rata amount set aside on account of taxes, depreciation, mterest on invested capital and any other periodical charges, and any amounts added to or withdrawn from the reserve fund. Section 8. When any company accepts this act it shall file with such acceptance a schedule of eight different grades of fares of which four shall be below its existing rate of fare and four above, and the public service commission shall, within sixty days thereafter, either approve the schedule so filed or establish eight other grades of fare in place thereof, and the commission shall at the same time designate which of the rates of fare so estajblished shall thereafter be in force as being, in the opinion of the com- mission, that rate of fare which will enable the company to earn an income sufficient to meet the cost of the service: provided, however, that if, during any period of sixty days, more than one company shall file its acceptance of this act and a schedule of proposed grades of fare, the commission shall not be required to approve or establish the grades of fare for any such company until thirty days after the commission shall have passed upon all schedules previously filed in accordance with the provisions of this section. Whenever, by reason of any change in the existing rate of fare, there are less than four grades either above or below any rate of fare which is then in force, the company shall forth- with file with the commission a schedule of such additional grades of fare as may be necessary, so that there shall always be not 1918.] SENATE — No. 265. 95 less than four above and four below the existing rate of fare, and the commission shall thereupon, within sixty days thereafter, either approve the schedule so filed or itself establish in lieu thereof the necessary additional grades of fare. In fixing the different grades of fare the differences between the same shall be such as to effect either an increase or decrease in the annual revenue of the company, in the opinion of the public service commission, of not less than thirty per cent of the reserve fund. If at any time it shall appear in the interest of the public or of the company that the said schedule should be changed either with regard to the method or basis upon which the fares and transfer privileges are established, or because the steps between the different grades are too small or too great, or for any other reason, the company and the commission may by agreement change the said schedule. The different grades of fare may include not only variations in the cash fare, but also provisions for sale of tickets at reduced rates, charging for or elimination of transfers, the establishment in whole or in part of the zone system, so called, or the variation of fare limits. Except as thus provided, the commission shall have power to annul, supersede or modify such schedule only after a public hearing, and only during a period of sixty days after the expira- tion of each successive period of five years subsequent to the ap- proval or establishment of such schedule: provided, however, that no modification in such schedule shall be made which in the opinion of the commission may diminish the rate of return on the stock investment provided for in section three. Section 9. If, as of June thirtieth or December thirty-first in any year, the amount of the reserve fund shall exceed by thirty per cent the amount originally established, the company shall on the following September first or March first put into effect the next lower grade of fare, and if, as of such June thirtieth or December thirty-first the reserve fund shall be less than seventy per cent of the amount originally established, the company shall on the following September first or March first put into effect the next higher grade of fare, and on the first days of September and March in each year the grade of fare shall be decreased or shall be increased, as the case may be, if the amount of the reserve fund is above or below the above limits, as of the preceding June thirtieth or December thirty-first. Section 10. Every company intending to accept this act 96 REPORT ON STREET RAILWAYS. [Feb. shall, prior to such acceptance and as a condition thereof, provide by the issue and sale of additional bonds or capital stock an amount not less than per cent of the par value of its then outstanding stock, which amount shall be used from time to time with the approval of the public service commission to pay for additions and improvements to its property. Subscriptions to such additional bonds or stock may be made payable in such in- stalments and at such times as the board of directors of the com- pany may determine and the commission shall approve. Section 11. Any company accepting this act shall be bound by the fact of such acceptance to sell its entire property and franchises as a going concern to the commonwealth or to any political subdivision thereof at any time for an amount in cash equal to the capital invested as defined in section three hereof, and the purchaser shall in addition assume all the outstanding contracts, leases and other liabilities of the company other than stock and bonds issued for capital purposes. Section 12. The governor with the consent of the council shall appoint for a term of three years one of the directors of the board of directors of any company accepting this act, to be known as the state director. He shall be a resident of a city or town served by such company, but shall not be an owner of its stock or bonds. The by-laws of the company shall be modified so as to permit of the appointment of such director, and shall also provide for monthly meetings of the board. Section 13. The public service commission shall establish a special department, to be known as the street railway depart- ment, whose duty it shall be to furnish the commission with in- formation relative to the physical condition, service, manage- ment and operating efficiency of the street railway companies under its supervision. If, at any time, the commission receives evidence from this department that laxity, carelessness, ineffi- ciency or wastefulness in the conduct of the affairs of a company which has accepted this act as herein provided is seriously affect- mg Its net income, the commission shall at once inform the com- pany of such evidence and of the date of a public hearing at which both the department and the company shall be heard. After such hearing, if the commission finds that changes in the conduct of the affairs of the company are desirable in the public interest, it shall notify the company in writing of such changes and of the time within which they should reasonably be made. Section 14. In addition to the amount appropriated by the general court, the public service commission may annually ex- 1918.] SENATE — No. 265. 97 pend, in the performance of its duties under this act, an amount not exceeding two per cent of the amount expended and charged to operating expense in the last preceding calendar year for superintendence and salaries and expenses of general officers and general office clerks by the street railway companies under its supervision. Within thirty days after this act takes effect, and on or before the first day of April in each succeeding year, the public service commission shall submit to the tax commissioner a statement of the amount required for this purpose, and within ninety days thereafter the tax commissioner shall assess upon each of said street railway companies its share of such amount in proportion to its operating revenue for the last preceding year; and such assessment shall be collected in the same manner as taxes upon corporations. Of the amount so assessed and col- lected, any balance remaining on the thirtieth day of November in any year shall be carried forward to the next year, and shall be taken into account by the public service commission in deter- mining the total amount required for that year. Section 15. Any company desiring to accept the provisions of this act may apply to the public service commission to deter- mine the amount of its invested capital, and upon such determi- nation such company may accept this act by filing with the public service commission its election so to do authorized by a vote of not less than the holdings of a majority of its capital stock and (a) evidence satisfactory to the commission that it has or will provide the reserve fund mentioned in section six hereof; and (6) evidence satisfactory to the commission that it has or will provide the additional money by the issue of additional bonds or stock referred to in section ten hereof. Upon the filing of such acceptance it shall be the duty of the commission to de- termine from time to time the amount which the company shall set aside or expend for depreciation, obsolescence or for taking care of losses occasioned by sold, destroyed or abandoned prop- erty. Section 16. This act shall take effect upon its passage. Date Due f 9 mi feov^ cmwvn . 1)EC 3 in?5 f2w^ 1 7 1825 MAY 5 1932 /VKuj MAr 3/ Vfii^^ '» '♦ mj// O'i^B NEH m'tfttM DUPLICATE 0041435028 Otif •UK 'n END OF TITLE